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High tax on cigarettes in Punjab has made it one of the fastest growing markets for illegal cigarettes in the country. These locally manufactured tax-dodging cigarettes have over 15 per cent share of the total cigarette market and are continuously growing in the state.
Further, it was an alarmingly large and well-organised business, with some of India's largest manufacturers of illegal cigarettes (based inside and outside the state), supplying over 20 million units to the state a month. Consequently, the government is suffering an annual revenue loss of Rs 75 crore. This was highlighted during the seminar 'Curbing Counterfeiting and Smuggling - An Imperative for Indian Economy' organised by FICCI-CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) with an agenda to spread widespread consumer awareness about the menace of smuggling and counterfeit products.
Experts pointed out that high taxation on cigarettes in Punjab is the key reason for the large and growing market of illegal or tax-evaded cigarettes. Speaking to Business Standard, Punjab Cigarette Seller Association, President, A K Dutta said, "The Tax disparity owing to steep hike in tax rates on cigarettes (55%) in Punjab has led to a very sharp price hike in cigarettes in Punjab compared to neighboring states. This has also resulted into an illegal trade of cigarettes from the surrounding sates and encourage smuggling."
It may be recalled that the Punjab government hiked VAT rates on Cigarettes from 22.5 per cent to 55 per cent with effect from April 1, 2013. It is worth mentioning VAT on cigarettes in Delhi is 20 per, Haryana (20 per cent) and Himachal Pradesh is 36 per cent.
The seminar also brought out the fact that Tobacco sector continues to account for the highest revenue to tax percentage loss to the government at over 60 per cent and Punjab is no exception. These illegal cigarettes in Punjab are particularly popular amongst youth as they are available at a significantly lower price than the legal cigarettes, as they are sold in the market at one fifth the price of legal product. The loss of revenue to the government because of the illegal cigarettes trade is staggering, but, the cost to the health is incalculable as they pose major health hazards to smokers because of the inferior manufacturing processes and the low quality of tobacco with high levels of tar & nicotine used for such products.
