A 15 per cent VAT and an additional Rs. 5.00 tax will be levied on a cigarette.

With that, the price of a cigarette, presently at Rs. 35, will go up to Rs. 46, say the sources.

A cabinet paper to raise the tobacco levy will be presented next week, the sources add.

Tax concession to CTC?

Meanwhile, the finance ministry has proposed a 20 pc tax concession to CTC to prevent its collapse, if the taxes on tobacco are raised to 90 pc.

That will be a 10 pc concession for the company’s agricultural activities and a further 10 pc on its community services.

However, this proposal is yet to be discussed officially.

The president had proposed a 15 pc VAT and a 90 pc tax on cigarettes in order to discourage smoking, but certain government politicians and the finance ministry opposed it.

This has aggravated to a crisis within the government, and a cabinet subcommittee was appointed to make a study of the matter.

That subcommittee has advised against the proposed tax increases.