Organised cigarette players cheer low duty hike

In the Budget FY18, the govt hiked the duty on cigarettes by 6%

The government is gradually tightening its noose around non-cigarette tobacco products like bidi, chewing tobacco and other products and planning to create a level playing field in the segment by ushering in a new regulatory regime for the entire sector.

Interestingly, while non-cigarette and illicit tobacco products account for 89 per cent of the entire market, they pay only 13 per cent of the total tobacco share in taxation, while legal cigarettes, which account for 11 per cent of the market, pay 87 per cent of the tax.

In the Budget FY18, against expectations of a 10 per cent duty hike in cigarettes, the government hiked the duty by only six per cent — the lowest hike in the past six years. However, it wasn’t benign for the non-cigarette sector. The excise duty on hand-made bidis rose by 33 per cent. 

On machine-made variant, the increase is 271 per cent. Finance Minister Arun Jaitley also increased the additional duty of excise on pan masala, gutkha and khaini by three and six per cent, respectively.

Interestingly, bidis didn’t see any hike in excise during the Budget FY17. 

In the past Budgets, cigarette companies have been the prime targets for the excise duty hike, while the mostly unorganised bidi and chewing tobacco sectors were let off lightly. In the Budget  FY17, the duty hike on cigarettes was 10 per cent, while it stood at 13 per cent in the Budget FY16. The Budget FY15 increased the rate by 21 per cent and the Budget FY14 upped the duty by 18 per 

cent. Abneesh Roy, senior vice-president of institutional equities at Edelweiss Securities said, “Apart from the duty hike, the government’s initiatives suggest that its stance on other forms of tobacco has become tougher.”