July 14, 2014
Will accelerate shift to other tobacco products, fears Director Syed Mahmood
Bangalore: The Union Budget’s proposed steep hike in excise duties on cigarettes, ranging from 11 per cent to 72 per cent, is likely to accelerate smuggling and tax evasion by domestic trade, according to the Tobacco Institute of India (TII).
July 14, 2014
Will accelerate shift to other tobacco products, fears Director Syed Mahmood
Bangalore: The Union Budget’s proposed steep hike in excise duties on cigarettes, ranging from 11 per cent to 72 per cent, is likely to accelerate smuggling and tax evasion by domestic trade, according to the Tobacco Institute of India (TII).
It is now established that illegal trade in cigarettes leads to a loss of ₹6,000 crore to the Indian exchequer annually.
“It is evident from industry trends and Government-sponsored studies that high and discriminatory duty increases on cigarettes will further divert and accelerate shift in tobacco consumption from revenue-efficient cigarettes to cheaper and revenue-inefficient forms of tobacco products,” said Syed Mahmood, Director, TII.
“After all, taxation on cigarettes is already 47 times higher than on other tobacco products.” Duty-paid cigarettes today account for “a mere 12 per cent of the total tobacco consumption in the country and the share is likely to be eroded further as a result of the Budget proposals,” he added.
The share of cigarettes in total tobacco consumption has come down from 21 per cent in 1981-82 to 12 per cent currently even as the overall consumption has grown by 42 per cent in this period given the skewed taxation policy.
The Budget has overlooked the fact that bidis, outsell cigarettes in the ratio of 8:1.
According to Ahmad, “Cigarettes represent only 15 per cent (12 per cent for legal cigarettes) of tobacco consumption, while bidis along with other tobacco products such as chewing tobacco, khaini, and so on, represent the majority 85 per cent of consumption in India, which are much more affordable as they are either taxed lightly or evade taxation.”
The steep hike in excise duty rates has come after sharp increases in the two preceding years.
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