Gandapur refuses to withdraw tobacco cess and provincial excise duty

PESHAWAR: In a major decision, Khyber Pakhtunkhwa (KP) Chief Minister Ali Amin Gandapur has refused political pressure of his party to withdraw the tobacco cess and provincial excise duty on tobacco companies.

He has made it clear to the party leaders that he will not tolerate any obstacle to increasing the provincial funds. The KP government has imposed Rs50 as provincial excise duty on tobacco to collect an amount of Rs5 billion. Similarly, the tobacco cess rate has been revised from Rs6 to Rs50 per kg but the provincial cabinet fixed it at Rs25 per kg.

The decision will help the provincial government collect Rs7.5 billion for the province as a whole.

The sources told this correspondent that a group of PTI MPAs and MNAs are actively involved in tobacco manufacturing and they have always opposed a tax on tobacco in the province and by the federal government. However, this time Ali Amin flatly refused to accept their pressure.

Mohammad Ali Saif, Adviser to the Chief Minister on Information, confirmed that the matter was discussed in Friday’s cabinet meeting. However, the CM refused to withdraw the tax and cess. “It has been decided by consensus that cess will be reduced from Rs50 to Rs25 per kg with an increase of 10 percent every year,” he added.

Credible sources confirmed that a delegation of influential MPs met Ali Amin Gandapur and requested him to withdraw the tax and decrease the tobacco cess to around Rs10 to 12 per kg.

The party leaders informed the chief minister that the government’s decision will be a setback to PTI in the tobacco-growing areas. They pressured the government to decrease the cess from Rs50 to Rs12 per kg.

Chief Minister Ali Amin Gandapur rejected the proposal. However, it has been agreed that the tobacco cess would be fixed at around Rs25 from Rs6 per kg. The chief minister made it clear that the proposed tax is imposed on companies, not on voters of their constituencies. However, later on, the cabinet decided to increase the tobacco cess from Rs6 to Rs25 per kg in the next financial year.

A minister on condition of anonymity told this correspondent that tobacco companies and some PTI leaders were inciting farmers to protest even though the farmers were not taxed. Only companies buying tobacco will pay taxes and additional cess. The source disclosed that KP gets only Rs500 million from tobacco cess while the federal government earns Rs250 billion from tobacco taxation.

When contacted, Adviser to Chief Minister on Finance Muzzamil Aslam said tax on tobacco is the province’s right because tobacco is produced in Khyber Pakhtunkhwa.

“We have imposed provincial excise duty on tobacco and if the decision is challenged in any court, the KP government will defend its right. The federal government collected around Rs250 billion from tobacco tax and the income was distributed among all the provinces,” he said. He said tobacco companies want to develop their business but do not want to give the rights to the province.