TN growing market for illegal cigarettes

Government suffers annual tax loss of over Rs 50 crore

Tamil Nadu is one of the growing markets for illegal/tax-evaded cigarettes in the country. These locally manufactured and smuggled tax-evaded cigarettes have a 5-10 per cent share of the market and are continuously growing in Tamil Nadu.

“It is an alarmingly large and well-organised business with some of India’s largest manufacturers of illegal cigarettes (based outside the state) supplying over 30 million illegal/tax-evaded cigarettes in the state every month. Also, Tamil Nadu being a coastal state, a huge quantity is also smuggled inside the state from neighbouring countries. Consequently, the government suffers an annual tax loss of over Rs 50 crore,” according to Ficci-Cascade (Committee Against Smuggling and Counterfeit Activities Destroying the Economy).

These cigarettes are particularly popular among the youth as they are available at a significantly lower price than the  legal cigarettes.

In Tamil Nadu, the state level taxes on cigarettes are currently at 20 per cent (VAT), which is much higher than the VAT of 12.5 per cent introduced across all states in 2007. Hence, tax evasion on cigarettes becomes an inviting proposition here, it said. 

Despite accounting for only 15 per cent share of the total tobacco consumption, cigarettes generate over 75 per cent of the tax revenue from tobacco.