| Additional tax burden may result in higher prices.
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| The Rs 15,000 crore tobacco industry in the country could take a hit of nearly Rs 700-800 crore with the finance minister’s decision to increase the specific rate on cigarettes by 10 per cent and impose a surcharge on ad valorem duties on other products such gutkha, pan masala and chewing tobacco.
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| “The additional tax burden is not something we can absorb. There will definitely be an increase in cigarette prices,” said Sandeep Kumar, vice president (corporate affairs), Godfrey Philips India, the country’s second largest cigarette manufacturer.
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| He, however, said that it was too early to comment on the extent of the price increase. “The price increase is a marketing decision, and will vary for different brands according to their sales volumes and demand,” he said.
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| The spokesperson of the country’s largest cigarette firm, ITC, refused to comment on the issue and said it is looking into the implications of the surcharge on cigarettes.
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| But according to industry sources, ITC would be the worst affected as the company has a more than 80 per cent of the market share and its bestselling brands Navy Cut and Goldflake alone account for nearly Rs 4,500 crore in revenue.
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| The finance minister has proposed to allocate the funds collected through the surcharge to fund the national rural health mission.
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| Cigarette manufacturers have contended that the omission of bidis and the increase in specific rates is inexplicable as cigarettes account for just 14 per cent of the entire smoking tobacco market.
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| “As a punitive tax, it won’t achieve the government’s health objectives because consumers will switch to cheaper alternatives such as bidis which are more harmful,” Kumar said.
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| “We welcome the government’s intent to increase spending on healthcare, but we expect the finance minister to be judicious in spending the revenue collected through the surcharge,’ said Ashok Aggarwal, president, DS Group, the country’s largest chewing tobacco and gutkha manufacturer. |
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