Rs 58.5K cr of taxes lost in 5 industries due to illicit trade: FICCI study

Says 1.5 mn jobs lost because of such trade; FMCG sector worst affected

Illicit trade in five key industries caused the Indian exchequer a tax loss of Rs 58,521 crore, and also resulted in the loss of 1.6 million jobs, according to a report by the Federation of Indian Chambers of Commerce & Industry (FICCI) released on Thursday.

The report, titled ‘Illicit Markets: A Threat to Our National Interests’, pegged the size of the illicit market in the five industries – mobile phones, household and personal goods, packaged foods, tobacco products, and alcoholic beverages – at Rs 2.6 trillion in 2019-20.

According to the report by FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), the “two highly regulated and taxed industries, tobacco products and alcoholic beverages, [accounted] for nearly 49 per cent of the overall tax loss”.

The combined fast-moving consumer goods industry — household and personal goods, and packaged foods — has been particularly badly hit, accounting for three-fourths of the total illicit value of goods and 68.5 per cent of job losses, according to the report.

The report suggests that addressing the demand-supply gap of legitimate goods, strengthening the domestic manufacturing sector, increasing awareness among consumers, rationalisation of tariffs to reduce tax arbitrage, creation of a conducive environment for innovation, and strengthening the intellectual property rights (IPR) regime, could help tackle this problem.

Najib Shah, former chairman of the Central Board of Indirect Taxes and Customs, is to empower consumers. “It is essential that the consumer should be empowered by being made aware that Illicit trade results in the loss of government revenue, generates black money which can be further used to fund other criminal activities.”

Addressing the FICCI-CASCADE ‘MASCRADE 2022’ event, former vice-president M Venkaiah Naidu said: “We need to counter smuggling, counterfeit trade with all the strength and means at our disposal. This requires collective effort from industry bodies, consumers, retailers and other stakeholders to keep a watch on such activities in order to put an end to this menace.”

Speaking to Business Standard, Anil Rajput, chairman of FICCI CASCADE, said the government must look into this issue and take necessary measures. “It is ultimately the power of the consumer to avoid purchasing these goods, which can play a pivotal role in bringing down smuggling and counterfeit trade,” he said.