Cigarette Tax Hike To Hit Farmers, Boost Illicit Sales, Warns Tobacco Industry Body

The government's reintroduction of central excise duty on cigarettes over and above the Goods and Services Tax from February will negatively impact tobacco farmers and provide a huge fillip to Illicit trade, industry body Tobacco Institute of India said on Thursday.

Starting next month, unfiltered cigarettes shorter than 65 mm will attract an excise duty of Rs 2,050 per 1,000 sticks, while filtered cigarettes up to 70–75 mm will be taxed at Rs 5,400 per 1,000 sticks. Longer and premium variants will face even higher levies, with duties going up to Rs 8,500 per 1,000 sticks.

"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," TBI said in a statement.

"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," it added.

The group said cigarettes are already a highly taxed product in India and legal cigarettes constitute only 10% of the total tobacco consumption while contributing 80% of tobacco tax revenue. It cited World Health Organisation data that claimed cigarette taxes in India as a percentage of per capita GDP are amongst the highest globally.

"TII requests 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," the statement said.