OPERATING CHALLENGES TO THE LEGAL CIGARETTE INDUSTRY IN THE COUNTRY
(a thread)
(a thread)
The high rates of tax on cigarettes provide attractive tax arbitrage opportunities for illicit trade allowing sale of these cigarettes to consumers at prices much lower than those of duty-paid domestic cigarettes.
While the legitimate cigarette industry has declined steadily since 2010-11 at a compound annual rate of over 4% p.a., illegal cigarette volumes in contrast have grown at nearly 5% p.a. during the same period.
Duty-paid cigarettes constitute only 10% of total tobacco consumption in India and per capita consumption of cigarettes in India is among the lowest in the world.
As a result, despite accounting for merely 10% of the tobacco consumed in the country, duty-paid cigarettes contribute more than 86% of the revenue generated from the tobacco sector.
It is estimated that on account of illegal cigarettes alone, revenue loss to the Government is more than 13K cr. p.a. In respect of the other tobacco products also, the revenue losses are significant since about 68% of tobacco consumed in the country remains outside the tax net.
India is the 2nd largest tobacco grower in the world. Tobacco occupies a prime place in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors.
According to Euromonitor International, India is now the 4th largest illegal cigarette market in the world and clearly a preferred destination for international cigarette smugglers.
Despite just 9% share of tobacco consumption, legal cigarettes contribute 80% of tax revenue. The total tax revenue collected from tobacco products is more than Rs. 43K cr. annually.
Illegal cigarette trade - comprising international smuggled and locally manufactured tax evaded cigarettes accounts for as much as 25% of the cigarettes industry in India.
Imagine the level of tax evasion happening under the nose of authorities.
Imagine the level of tax evasion happening under the nose of authorities.
Govt. should take strict action against the illegal international cigarette cartel by introducing more stringent policies on them.
And help our ‘Indian’ tobacco manufacturers and farmers become #Aatmanirbhar
And help our ‘Indian’ tobacco manufacturers and farmers become #Aatmanirbhar
