JOIN USIndia loses Rs 13,000 crore every year due to illegal cigarettes: Report
India loses a revenue of about Rs 13,000 crore every year due to illegal cigarettes trade.
India now accounts for as much as one-fourth of the world's illegal cigarette market, according to a report by tobacco industry body The Tobacco Institute of India (TII). Illegal cigarettes have more than doubled from 12.5 billion sticks in 2005 to 26.5 billion sticks in 2018, the report noted quoting Euromonitor International data.
One of the key reasons behind the rise in illegal cigarettes trading, which hit a record high during the coronavirus-induced lockdown, is extremely high tax. “Extremely high and constantly increasing tax rates on cigarettes provide a profitable opportunity for tax evasion thereby encouraging growth in illegal trade,” the report noted.
The report points out that the legal cigarette industry in India is suffering due to high taxation on cigarettes over the years particularly between 2012-13 and 2017-18.
"The Goods and Services Tax (GST) regime introduced in July 2017, increased the tax burden on cigarettes by increasing the GST compensation cess rates by a weighted average of about 13 per cent over the pre-GST tax rates,” the report found.
It further added, "The huge increase in National Calamity Contingent Duty (NCCD) rates in the Union Budget 2020-21 is likely to provide a further boost to the illicit tax evaded cigarette trade in the country."
India is the world’s second-largest producer and a major exporter of tobacco, which provides livelihood to 45.7 million people. The industry body pointed out that tobacco products generate tax revenue to the tune of Rs 43,000 crore annually.
Yes, illegal cigarettes are cheap but what at what cost?
Illegal cigarettes are sold cheap due to tax evasion. Some of the many serious consequences of growth in illegal cigarette trade include:
- Aids the prevalence of organised criminal syndicates and terror outfits that control illegal trade in cigarettes
- Undermines the tobacco control policies of the government by not adhering to tobacco regulations
- Adversely impact the demand for domestic tobaccos since contraband products do not use locally-grown tobaccos