Industry lobby Ficci has said that losses arising due to rampant smuggling of cigarettes, that has been on the rise since domestic taxes on cigarettes hit the roof, have touched Rs 13,130 crore in 2014, up from Rs 8,965 crore in 2012.
The resultant loss to the government by way of unpaid taxes was Rs 9,139 crore in the reporting year, up from Rs 6,239 crore in 2012, says the report prepared by 'Thought Arbitrage Research Institute' for the industry lobby.
The report also warned that as much as 25 per cent of all tobacco sold in the country will be illicit trade over the next few years.
"The grey market percentage in the tobacco industry (excluding bidis) has increased from 15.7 per cent in 2010 to 20.20 per cent in 2012. The resultant losses from this shot up a whopping 46 per cent to Rs 13,130 crore in 2014, from Rs 8,965 crore in 2012. The resultant loss to the government in the form of unpaid tax is Rs 9,139 crore, up from Rs 6,239 crore in 2012," the report said.
The report also warned that the trend is likely to continue on the back of steep hike in duties in the budget, with the volume of illicit trade likely to touch 27 billion sticks per year over the next few years. As much as one-fourth (25 per cent) of the tobacco market will be illicit brands.
Taxes add up to over 50 per cent of the retail price of cigarettes.
In the states where the taxes went up, there was massive 58 per cent fall in revenues on an average in 2013-14, the report said, adding that states like UP, Bihar, MP, Chhattisgarh and Rajasthan are home to large number of illicit cigarette manufacturing facilities.