Excise Duty on Alcohol: Constitutional Constraints in Pakistan

An expert has stated that the Pakistani constitution does not permit the federal government to levy Federal Excise Duty (FED) on alcoholic beverages.

Raza Ashfaq Sheikh, a tax consultant and former Chief of the Federal Board of Revenue/Member Appellate Tribunal (PRA), informed that the existing constitutional structure does not grant the federal government the power to impose excise duty on alcoholic drinks. He highlighted that Entry No. 44 of the Federal Legislative List specifies that excise duties, including those on salt, do not extend to alcoholic liquors, opium, and other narcotics.

Sheikh asserted that any attempt to impose such a tax would be deemed unconstitutional and likely be overturned by the higher courts.

Previously, it was suggested that the Federal Board of Revenue (FBR) explore the possibility of imposing federal excise duty on the supply of alcoholic beverages to generate significant revenue.

Another tax specialist suggested that if the government aims to tax alcoholic beverages, it has several options available. These include setting a minimum retail price (MRP), implementing a 25% tax on these items as luxury goods, or levying FED on the raw materials used in their production.