By Ijaz Kakakhel

The government has collected Rs1.342 trillion from tobacco manufacturers in sales tax and federal excise duty (ST&FE) over the past 10 years, from 2015-16 to fiscal year 2025-26.

According to documents available with Wealth Pakistan, these revenues were generated from both imported and domestically produced tobacco products, as reported in Sales Tax and Federal Excise (ST&FE) returns filed with the Federal Board of Revenue (FBR).

The tobacco industry is subject to an 18% sales tax, along with a multi-tier federal excise duty (FED) based on retail prices. At present, FED rates stand at Rs16,500 per 1,000 cigarettes for Tier-I and Rs5,050 per 1,000 cigarettes for Tier-II, as specified under S. No. 9 and 10 of Table-I of the First Schedule to the Federal Excise Act, 2005.

During 2025-26, the government collected Rs107.944 billion from tobacco manufacturers under ST&FE, compared to Rs225.883 billion in the previous year, a decline of 52.21%.

The highest collections were recorded in 2023-24 at Rs237.144 billion. Compared to this peak, collections in 2025-26 declined by Rs54.48 billion.

Year-wise collections stood at Rs142.091 billion in 2022-23, Rs117.321 billion in 2021-22, Rs107.416 billion in 2020-21, and Rs89.658 billion in 2019-20.

Earlier, the government collected Rs90.867 billion in 2018-19, Rs67.005 billion in 2017-18, Rs66.199 billion in 2016-17, and Rs90.862 billion in 2015-16.

The decline in sales tax and federal excise collections is largely attributed to the increasing market share of non-duty-paid tobacco products. Despite significant increases in FED rates — in some cases up to 200% — revenue has declined as consumers shifted towards cheaper, untaxed alternatives.

Credit: INP-WealthPk