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Federal Excise Law Services

Kakakhel Law Associates | Federal Excise Law Services - Pakistan

Federal excise law refers to a legislated duty applied to specific goods or services, such as tobacco, cement, automobiles, and liquefied natural gas. These excise duties are intranational, meaning they are imposed within a government’s infrastructure, unlike international duties that apply across country borders.

Federal excise duty (FED) is typically levied on certain types of manufacturing, the import of goods, and the provision of services at varying rates. This duty is collected on items such as automobiles, cement, and tobacco. Additionally, sales tax on services, which replaces FED, is levied and collected by provinces for services rendered within their respective jurisdictions, as outlined by the constitution.

A fundamental understanding of Federal Excise Duty (FED) concepts is essential for ensuring tasks are carried out efficiently and in compliance with prescribed procedures. This includes the proper deduction of the duty paid on goods used in the manufacture or production of other goods, which can be offset against the duty payable on the final products.

The Federal Excise Act, 2005 was promulgated with effect from 1st July 2005, repealing the Central Excises Act, 1944. Below are some significant changes introduced by the new Act:

  • Change in Terminology: The word "Federal" replaced "Central," making the term "Federal Excise Duty" more appropriate than the previous "Central Excise Duty" under the 2005 Act.
  • Self-Assessment System: The physical supervision system has been abolished. Now, all clearances will be self-assessed, and no prior permission is required for clearance.
  • Monthly Duty Payments: The duty payment is now on a monthly basis, and the duty on all clearances during the month is payable by the 15th of the next month. This replaces the previous requirement of duty payment before clearance.
  • Elimination of Gate Passes: Gate passes are no longer required for clearances, as in the old system.
  • Elimination of Double Taxation: Double taxation has been removed by allowing the adjustment of excise duty paid on input goods used directly in manufacturing excisable goods.
  • Excise Duty on Certain Goods and Services: For certain goods and services, Federal Excise Duty (FED) is payable in VAT form, as provided in the Sales Tax Act, 1990. For more details, see the link ‘Goods/Services Liable to Excise Duty.’

Federal Excise Duty is Payable On:

  • Goods produced or manufactured in Pakistan.
  • Goods imported into Pakistan.
  • Goods produced or manufactured in non-tariff areas and brought to tariff areas for sale or consumption.
  • Services provided or rendered in Pakistan.

Exemption of Goods & Services (Sec. 16):

  • Goods and services specified in the First Schedule are subject to Federal Excise Duty as set forth therein.
  • Goods and services listed in the Third Schedule are exempt from duty, subject to specified conditions and restrictions, and no adjustment under Section 6 is allowed for goods exempt from excise duty.
  • Goods mentioned in the Second Schedule are charged to FED in the same manner as provided in the Sales Tax Act, 1990, as per Section 7 of the Federal Excise Act, 2005.

Special Excise Duty

As part of the budgetary measures for the year 2007-08, a Special FED at 1% was levied on goods manufactured or imported in Pakistan. This duty is in addition to the FED prescribed in the First Schedule of the Federal Excise Act, 2005. For a list of goods excluded from this special duty and other details, see SRO 655(I)/2007.