Hyderabad / New Delhi, April 23 (Bureau) The high taxation and extreme regulations have resulted the share of legal cigarettes in total tobacco consumption in the country has shrunk by 37 per cent to a mere 9 per cent at the present from 21 per cent in 1981-82, according to the Tobacco Institute of India (TII). The Tobacco tax policy has many unintended consequences such as the steep increase in illicit cigarette volumes and the shift in consumption from legal tax-paid cigarettes to tax inefficient forms of tobacco consumption, defeating both revenue and public health objectives, the institute said. As a consequence, the legal cigarette volumes have shrunk while the illicit volumes are on the rise, it said that the Legal cigarettes are the smallest constituent of tobacco consumption in India but bear the brunt of over regulation and excessive taxation.
Legal cigarettes account for just 9 percent of overall tobacco consumed in India and the remaining 91 per cent consumption is in the form of illegal cigarettes and almost 29 other tax-inefficient tobacco products such as bidis, chewing tobacco and Khaini, it said. While legal cigarettes and a small proportion of bidi and chewing tobacco production is in the organized sector, the majority 68 per cent of tobacco consumption in India is in the unorganized sector which escapes all tax and regulatory oversight, the Institute said. Despite a mere 9 percent share of tobacco consumption, legal cigarettes contribute 80 per cent of total revenue collected by the government, the institute said.
Taxes on Cigarettes increased at a CAGR of 15.7 percent between 2012-13 and 2016-17 and during the Union Budget 2017-18 and with the imposition of Goods and Services Tax (GST) in July 2017, the tax burden on cigarettes increased by as much as 20 per cent, it said. The union Budget, presented in February, 2020, increased NCCD rates with an overall tax impact of 13 per cent. In the Union Budget of 2023-24 NCCD rates on cigarettes were further hiked by 16 per cent. Cigarette taxes in India, of the most sold brand, as a percentage of per capita GDP, are amongst the highest in the world as per data provided in the WHO Report on the Global Tobacco Epidemic, it said. This has made legal cigarettes in India amongst the least affordable in the World, providing a huge boost to Illicit Cigarettes. Among the top five tobacco producing countries, India has the largest sized pictorial warning on packs at 85 per cent, followed by Brazil at 65 percent while USA, China and Zimbabwe have textual warnings only, the institute said. China and the USA are also large cigarette consuming countries, together accounting for almost half of the global cigarette consumption. India ranks 9th in the world, in terms of warning size, whereas the global average warning size is around 45 per cent, it added.