PESHAWAR: The Khyber Pakhtunkhwa government will increase the tax rate on tobacco used for smoking and cigarettes by 900% for the fiscal year 2024-25.
New Excise Duty on Tobacco
For the first time, the government will impose a provincial excise duty on tobacco. A separate tax of 50 rupees per kilogram will apply. Due to public outcry, the government backed off from taxing registered vehicles from outside the province.
Proposed Tax Increases
The government proposed increasing the tobacco tax for cigarettes from 6 rupees to 50 rupees per kilogram. This will raise cigarette prices. The tax on local tobacco will increase from 3 rupees to 30 rupees per kilogram. The tobacco tax for cigars will rise from 2.50 rupees to 20 rupees per kilogram, increasing cigar prices.
Additional Tax and Fee Changes
The provincial excise duty of 50 rupees per kilogram on tobacco will be implemented. The government proposed reducing the vehicle registration fee by 1% for vehicles from 13cc to 25cc and by 4% for vehicles above 25cc. Property tax will slightly increase for residential properties. The tax for commercial properties will drop from 16% to 10%. Banks will see a reduction from 16% to 15%.
Read more: KP govt drafts budget of PKR 1654 billion for FY 2024-25
Road Usage Charge Tax
The government decided to impose a road usage charge tax, introducing an annual token tax on registered vehicles from outside the province. This tax aims to pressure the federal government to increase the province’s share from 20 to 25 billion rupees in the NFC Award. The provincial government argues that people contribute 20 to 50 billion rupees annually in vehicle taxes, collected by the federal and Punjab governments.
Secretary’s Remarks
Secretary Excise Taxation and Narcotics Control, Fayyaz Ali Shah, noted that tobacco is a provincial subject, with the federal government collecting 390 rupees per kilogram in federal taxes. The new tax will generate revenue for the province. He highlighted that thousands register cars in Islamabad annually. If registration starts in the province, it could generate billions of rupees annually.
