The cigarette industry is optimistic that the recent vacation of a stay order by the Islamabad High Court (IHC) will clear the path for the installation of a trace and track system (TTS) by cigarette manufacturers, aiming to curb the influx of illicit and smuggled cigarettes in the market.
According to discussions with cigarette industry officials, a number of local manufacturers had filed stay orders to prevent the Federal Board of Revenue (FBR) from implementing the TTS. However, the IHC recently vacated these stay orders, following a similar decision by the Peshawar High Court. This development now allows the FBR to demonstrate its political will in enforcing the TTS at all cigarette manufacturing facilities, enabling effective monitoring on the ground.
Technology has revolutionised various aspects of modern life, including tax collection. The use of TTS has proven to be a game-changer in combating tax evasion, and similar systems are already operational in different parts of the world.
FBR has long been considering the implementation of a TTS to tackle tax evasion in sectors such as tobacco, cement, sugar, and fertiliser. The FBR had previously announced plans to roll out the system from July 1, 2021. This initiative aimed to establish a robust nationwide electronic monitoring system for production volumes, involving the application of over 5 billion tax stamps on various products to enable tracking throughout the supply chain.
The anticipated benefits of the TTS included enhanced tax revenue, curbing counterfeiting, and preventing the smuggling of illicit goods. The system was inaugurated on October 1, 2021, at a Pakistan Tobacco Company (PTC) unit in Jhelum by former finance minister Shaukat Tarin. It was hoped that the installation of the TTS in all cigarette manufacturing units would improve tax collection in the tobacco sector.
However, the implementation of the TTS has faced significant obstacles in the past two years.
Published in The Express Tribune, May 31st, 2023.
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