Sale of 'illegal cigarettes' surging in India: Report

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The high and discriminatory central and state taxes on cigarettes have negatively impacted their sales but have also resulted in India emerging as the fifth largest "illegal cigarette" market in the world, a report said on Friday.

In the report, published ahead of World No Tobacco Day on May 31, the Tobacco Institute of India observed that the escalating excise duty burden on "legal cigarettes" has almost doubled in the last four years in addition to the high rates of value added tax (VAT) and other state level taxes.

According to Euromonitor International, a renowned global research organization, India is now the fifth largest illegal cigarette market in the world which translates to a revenue loss of more than Rs.7,000 crore to the national exchequer. Illegal cigarettes are internationally smuggled and domestically manufactured tax evaded cigarettes.

"The legal cigarette industry in India is in the organised sector while the bulk of tobacco consumed is largely produced in the unorganised sector where compliance and enforcement are extremely difficult.

"This large unorganised sector, representing two-third of the tobacco industry, pays little tax either due to tax exemptions or evasion. The products from this sector are cheaper, have little statutory oversight and do not comply with regulations," the report said.

While the legal cigarettes' share of total tobacco consumption in India has declined from 21 percent in 1981/82 to 12 percent currently over the last three decades, the overall tobacco consumption in the country has increased by 42 percent during the same period.

The increasing illegal trade also encouraged organised criminal syndicates, which could have serious consequences for the maintenance of country's law and order.

Internationally, it has been reported that illegal profits from cigarette smuggling have been used to fund criminal activities, the report said.