Government urged to address illegal cigarette trade through GST

The TII said that the step will provide relief to the legal cigarette industry and boost revenue collection from this sector. India has the fourth largest illegal cigarette market in the world. As per TII, since contraband products do not use locally grown tobacco, illegal trade affects demand for domestic tobacco thereby, impacting the earnings and livelihood of tobacco farmers in the country.

“The illegal trade in cigarettes in India, like the rest of the world, is controlled by criminal and terrorist organizations. Internationally, it has been determined that profits from cigarette smuggling have been used to fund criminal and terrorist activities posing a huge threat to National Security,” said an statement from the TII.

Legal cigarettes in India account for just 11 per cent of the overall tobacco consumption. The rest 89 per cent is represented by traditional products like chewing tobacco and ‘bidis’. “The Goods and Services Tax bill presents a unique opportunity to the government to address the growing illegal trade in the country,” said Syed Mahmood Ahmad, Director, TII.

He said that recent seizures of smuggled cigarettes by enforcement agencies are only “the tip of the iceberg of a much larger and threatening operation”. On March 17, Customs officials seized illegal cigarettes worth Rs 10.38 lakh in Coimbatore, after seizing Rs 38.65 lakh of the same on March 15. 

On March 3, Directorate of Revenue (DRI) officials arrested three persons for illegal possession of a large consignment of foreign brands worth Rs 15 crore in Noida. On January 31, smuggled cigarettes valued at Rs 2.2 crore was seized in separate raids at Mumbai’s Nhava Sheva port. 

Earlier, on January 3, a joint team of State Tobacco Control and the police intercepted cigarette packs being sold openly in a Chandigarh mall without the required pictorial warning. Illegal trade in cigarettes in the last five years has seen a huge surge.

A report by the Federation of Indian Chambers of Commerce and Industry (FICCI) estimates the overall market for illegal cigarettes in India at a significant 20.2 per cent, resulting in a huge revenue loss of Rs 9,139 crore to the national exchequer.