FBR collects Rs329 billion in excise duty, sales tax from tobacco sector in FY26

The Federal Board of Revenue (FBR) collected Rs357 billion in federal excise duty, general sales tax and income tax from the tobacco sector during FY2025-26, compared with Rs315 billion in the previous fiscal year, The News reported. 

Of the total, receipts from federal excise duty and general sales tax increased by Rs45 billion to Rs329 billion from Rs284 billion in FY2024-25, official sources said.

Pakistan Tobacco Company remained the sector’s largest taxpayer, contributing Rs260.7 billion during the year ended June 30, 2026, up from Rs222 billion a year earlier.

Philip Morris (Pakistan) was the second-largest contributor, depositing approximately Rs52.2 billion into the national exchequer during FY26.

FBR sources attributed the increase to the deployment of paramilitary forces at Green Leaf Threshing Units, enforcement of advance withholding taxes, action against illicit trade and provincial police operations targeting unstamped cigarette packs.

Despite these measures, illicit and smuggled cigarettes continue to account for around 45% of the market and cause an estimated annual revenue loss of Rs300 billion.

Annual cigarette consumption remains at approximately 81 billion sticks and has not declined, according to the sources.

The share of illicit and smuggled cigarettes increased after a 200% rise in the federal excise duty rate in FY2022-23 pushed up the prices of tax-paid products.

The government has kept the excise duty rate unchanged in recent budgets, while tax collection from the sector has continued to rise. However, illicit and smuggled cigarettes still hold the largest market share.

The FBR will need to strengthen enforcement at Green Leaf Threshing Units and improve coordination with provincial governments against unstamped cigarettes to realise the sector’s estimated annual revenue potential of Rs575 billion to Rs600 billion.