Tobacco consumption pattern in India is unique
Legal cigarettes account for just 11% of overall tobacco consumed in India. The balance 89% of consumption is represented by traditional products like chewing tobacco, bidis, khaini etc. and illegal cigarettes.
This is unlike the rest of the world where tobacco is synonymous with cigarettes, representing 90% of tobacco consumption.
Legal Cigarettes are subject to high & discriminatory taxation in India
Cigarette taxes on a per kg basis are 51 times higher than the other tobacco products consumed in India.
Apart from high excise taxation, State taxes (VAT etc.) on Cigarettes at a weighted average incidence of 24% is also higher than the incidence of State taxes on other tobacco products in all States.
Tobacco is a very important commercial crop in India
India is the world’s 2nd largest producer and a major exporter of tobacco. With an estimated annual production of 800 million kgs., tobacco is an extremely important commercial crop in the country, providing livelihood to 45.7 million people.
Tobacco products generate significant Excise duty and State tax revenues amounting to more than Rs.31,000 crores annually.
The Growth of illegal Cigarette trade poses serious threat in India
Illegal Cigarette trade accounts for as much as 1/5th of the Cigarette Industry in India, causing an annual revenue loss of Rs. 9,000 crores.
Extremely high and constantly increasing tax rates on Cigarettes provide a profitable opportunity for tax evasion thereby encouraging growth in illegal trade. As a result, illegal cigarette trade in the country has more than doubled since 2004 making India the fastest growing and 4th largest illegal cigarette market in the world.