FED and GST Collections Rise by Rs45 Billion
The Federal Board of Revenue collected Rs329 billion in Federal Excise Duty and General Sales Tax from Pakistan’s tobacco sector during fiscal year 2025–26.
The figure increased from Rs284 billion in the previous financial year.
This represents a year-on-year increase of Rs45 billion in the two major tax categories. The fiscal year ended on June 30, 2026.
The increase reflects stronger revenue collection from legally manufactured and tax-paid tobacco products.
Federal Excise Duty is imposed on selected goods, including cigarettes. General Sales Tax is collected on the sale of taxable products.
Combined collections from FED and GST remain an important source of government revenue from the tobacco industry.
When income tax is included, the FBR collected a total of Rs357 billion from the tobacco sector during FY2025–26.
The comparable figure stood at Rs315 billion during FY2024–25. This shows an overall increase of Rs42 billion across FED, GST and income tax.
Pakistan Tobacco Company Remains Largest Contributor
Pakistan Tobacco Company remained the biggest taxpayer in the sector.
The company deposited Rs260.7 billion during FY2025–26.
Its contribution stood at Rs222 billion during the previous fiscal year. This means its annual tax payments increased by nearly Rs38.7 billion.
Philip Morris Pakistan emerged as the second-largest contributor.
The company deposited approximately Rs52.2 billion into the national treasury during the financial year.
Together, the two major companies provided a significant share of the sector’s documented tax revenue.
Government sources linked the higher collection to stricter monitoring and enforcement.
Authorities deployed paramilitary personnel at Green Leaf Threshing Units to improve oversight of tobacco processing.
The FBR also strengthened the collection of advance withholding taxes.
Provincial police launched operations against cigarette packets without official tax stamps.
Authorities also increased action against smuggled and illegally manufactured cigarettes.
These measures helped improve collections from the documented tobacco market.
They also made it more difficult for some illegal manufacturers and distributors to avoid taxes.
However, the illicit cigarette trade remains a major challenge for revenue authorities.
Illegal Cigarette Market Still Costs Billions
Official estimates suggest that illegal and smuggled cigarettes account for around 45 percent of Pakistan’s cigarette market.
This undocumented trade reportedly causes an estimated annual revenue loss of nearly Rs300 billion to the national treasury.
Overall cigarette consumption in Pakistan remains close to 81 billion sticks annually.
Officials said national consumption has not significantly declined despite major changes in tax rates and retail prices.
The government previously increased Federal Excise Duty on cigarettes by around 200 percent.
That decision sharply increased the prices of legally manufactured cigarettes.
However, the higher prices also encouraged some consumers to shift towards cheaper, untaxed and smuggled alternatives.
As a result, the illegal cigarette market expanded after fiscal year 2022–23.
The government has kept cigarette excise rates largely unchanged in recent budgets.
Meanwhile, tax collections from the documented sector have continued to increase.
Officials believe stronger enforcement, rather than another major tax increase, could help generate more revenue.
The FBR may need to strengthen monitoring at tobacco processing facilities.
Closer coordination with provincial governments will also be required to stop the production and sale of unstamped cigarettes.
Authorities estimate that improved enforcement could eventually raise annual tobacco-sector tax collections to between Rs575 billion and Rs600 billion.
The latest Rs329 billion FED and GST collection shows improved performance.
However, the large illegal market means significant revenue remains outside the formal tax system.
Future collection growth will depend on stronger tracking, continued inspections and action against smuggling and unregistered production.
