As per the notification, the government has imposed an additional excise duty on cigarettes in the range of Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on the product’s length and type. The duty will be levied over and above the existing 40 per cent Goods and Services Tax (GST) on tobacco and similar products.
The Tobacco Institute of India (TII), a representative body of farmers, manufacturers, exporters and ancillaries of the cigarettes’ segment of the tobacco industry in India, said it is shocked and and surprised to note the unprecedented increase in duty, given the statements made by the Government on more than one occasion, that the overall impact of the transition of taxes will be revenue neutral.
Such a massive increase will cause immense hardship and loss to millions of farmers, MSMEs, retailers and local value chains nurtured by the Industry, besides providing a huge fillip to Illicit Industry and damaging national enterprises, it said.
It is well known that for every 3 legal cigarettes, 1 smuggled/illicit cigarette is sold in the country, and this high tax increase will further boost illegal and illicit activity depriving the National Exchequer besides promoting anti-social activity, the industry body said.
Cigarettes are already a highly taxed product in the country. Legal cigarettes constitute only 10% of the total tobacco consumption while contributing 80% of tobacco tax revenue. Cigarette taxes in India as a percentage of per capita GDP are amongst the highest in the World, as per the WHO data, it pointed out.
TII requested the Government to review the computations behind this extremely severe tax increase and reconsider the enormous hike given the huge implications.
As this imposition will have a debilitating and crippling impact on the entire value chain of more than 4 crore farmers, MSMEs, retailers and local value-chains besides dealing a body blow to legitimate Indian industry whilst promoting illicit trade, it said.