ITC pushes for compulsory licensing for all cigarette makers

In the past four years incidence of excise and VAT on cigarettes, at per unit level, has gone up cumulatively by 118% and 142%, respectively

ITC Ltd. said it has been advocating compulsory licensing of all cigarette-making units irrespective of size, and increase in customs duty on imported cigarettes to rates fixed by the World Trade Organization (WTO).

"Your company continues to make representations to policy-makers recommending compulsory licensing of all cigarette manufacturing units irrespective of size, increase in customs duty on imported cigarettes to WTO bound rate levels," said ITC, India's largest cigarette maker, in its Annual Report.

The company said high incidence of taxation and "a discriminatory regulatory regime" on cigarettes in India have led to a shift in tobacco consumption to lightly taxed or tax-evaded tobacco products like bidi, khaini, chewing tobacco, gutkha and illegal cigarettes, which constitute over 89% of total tobacco consumption in the country.

Over the last four years, the incidence of excise duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 118% and 142%, respectively, exerting severe pressure on legal industry volumes even as illegal trade grows unabated, ITC said.

It said its cigarette business remained subdued during the year ended March 31, 2016, due to unprecedented pressure on the legal cigarette industry in India on account of the cumulative impact of steep increase in taxation and intense regulatory pressures.

Revenue (standalone) from cigarettes stood at Rs 17,485.82 crore, up 4% in the 2015-16 as compared to Rs 16,804.56 crore in the previous year.

"The legal cigarette industry is likely to remain extremely challenging in the year ahead in view of the high levels of taxation, which was exacerbated by a further increase of 10% in excise duty as announced in the Union Budget 2016," the ITC Annual Report said.