ISLAMABAD: Collections by the FBR grow to Rs329 billion in terms of Federal Excise Duty (FED) and General Sales Tax (GST) collected from the tobacco industry in Pakistan during the fiscal year 2025-26, reveals government statistics. This figure represents a significant growth of Rs45 billion in comparison to the Rs284 billion collected in the last fiscal year 2024-25.

Dissection of the Increase

The FBR tax collectionsfrom the tobacco industry by the FBR from Rs315 billion to Rs329 billion owing to FED and GST can be attributed to increased enforcement activity in this industry, sources say. The increase in taxes notwithstanding, the illegal cigarette trade continues to flourish in the Pakistani market.

In addition to FED and GST, income tax included, the total tax collection by the FBR from the tobacco industry stands at Rs357 billion in FY2025-26, an increase of Rs42 billion compared to last year.

The Challenge of the Illicit Cigarette Market

While FBR tax collections increases to Rs 329 billion, it is recognized that the illicit cigarette market still makes up a large portion of all sales in Pakistan. The total consumption of cigarettes in the country remains constant at 81 billion sticks per annum, but a large part of this is still sold in the untaxed market.

This has largely been attributed to the hike in FED rates in fiscal year 2022-23 that led to an increase in the prices of tax-paid cigarettes, driving price-sensitive customers into buying from the illicit market. Although no increase has been made to FED rates in recent budgets of the government, tax collections have increased steadily.

Efforts for Enforcement Going Forward

To deal with this issue, the FBR intends to step up its enforcement efforts especially at Green Leaf Threshing Units, which are crucial in the process of making tobacco products, in addition to coordinating with the provincial governments in curbing the sale of un-stamped cigarettes, which pay no taxes at all.

It is believed that through these efforts, there would be a marked increase in the amount of tax revenue that the government would be collecting from the tobacco industry each year, which would range from Rs 575 billion to Rs 600 billion.

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FBR's Over-all Performance

The increased tax performance in this specific sector comes with the performance of the FBR for the fiscal year 2025-26 as a whole. On average, FBR generated Rs13.6 trillion in revenues in total taxes for the fiscal year. These figures include the income tax, which was Rs6,645 billion; sales tax at Rs4,731 billion; Federal Excise Duty at Rs840 billion, and customs duties at Rs1,385 billion in total.

Whereas there is an increase in tax collections in the tobacco sector at Rs329 billion by the FBR, the over-all tax collection performance of the organization is quite mixed through the year. There have been shortfalls in the achievement of goals that have been set up in the fiscal policy of Pakistan.