Budget 2023-24: Industry Body FICCI Calls For Reduction Of Taxes On Cigarettes

Industry body FICCI has called for reduction of taxes on cigarettes from the upcoming Union Budget 2023-24 which will be presented by Finance Minister Nirmala Sitharaman on February 1. 

"Cigarettes in India have been subject to punitive and discriminatory taxes over the years.  The high taxes on cigarettes over many years has taken cigarette taxation to the point of  “diminishing return”. This is evident from the fact that the sharp tax increases in the past, at a CAGR of 15.7 per cent between 2012-13 and 2016-17 years have translated to a revenue growth of only 4.7 per cent CAGR over the same period," FICCI said in its Pre-Budget Memorandum. 

After the introduction of Goods and Services Tax (GST) in 2017, cigarettes have been subjected to a whopping increase of 37 per cent in taxes. This has made cigarettes in India amongst the least affordable in the world as well as fueled illicit trade, resulting in loss to the exchequer, estimated in excess of Rs. 16,000 crore per  annum, FICCI said.
 
"Accordingly, for cigarettes, a balanced, practical and non-discriminatory taxation policy  combined with continued strict measures for curbing illicit trade and tax evasion would  be ideally suited for ensuring sustained growth in revenue, resolving the crisis of tobacco farmers and mitigate the immense hardship of the legal cigarette industry, within the overall tobacco control objectives," FICCI noted.

FICCI has called for reduction of taxes on cigarettes.

"This will hasten the recovery of volumes from illicit trade as well as arrest the shift of consumption to other forms of tobacco consumption. This would also enable buoyancy in revenue collection and provide an impetus to increasing farm incomes," FICCI said. 

FICCI has also called for introduction of a new segment of ‘less than 60mm length’ filter cigarettes with an appropriate tax levy to enable the legal cigarette industry to mount a serious challenge to the domestic duty-evaded cigarettes that are offered to consumers at Re 1 and Rs 2 per stick that is prices that are lower than even the applicable taxes. Such a measure will help reclaim market share from the illicit trade with consequential benefit to revenue.