Our Bureau

New Delhi, December 6

THE Tobacco Institute of India (TII) has sought a hike in basic customs duty on cigarettes to 150 per cent, retention of specific excise duty, withdrawal of the 15 per cent excise surcharge and exclusion of cigarettes from the proposed value-added tax regime.

A case has been made out for a ban on foreign direct investment (FDI) in the tobacco industry by the representative body of the cigarette-tobacco sector.

In its pre-budget interaction with top Finance Ministry officials on Wednesday, TII sought an increase in customs duty up to the bound rates in order to curtail cheaper imports.

It has also suggested that cigarettes be exempted from the proposed VAT regime on the grounds that the item already suffers from a "very high tax incidence".

The imposition of even a small percentage of VAT will have a "heavy cascading" effect on price, TII said, while opposing the attempts of the State Governments to bring cigarettes under the proposed VAT regime.

TII representatives also cited the recommendations of the Tax Reforms Committee (1992) to support their case for excluding cigarettes from VAT.

It has also contended that a specific duty structure on cigarettes was "far superior" to an ad valorem duty structure.

Cigarettes accounted for close to 80 per cent of the total excise revenues of Rs. 8,182 crore from tobacco products during 2000-01.

In absolute terms, the contribution from cigarettes worked out to Rs. 6,507 crore.

TII has also sought withdrawal of the 15 per cent surcharge levied as the National Calamity Contingency Duty (NCCD).

A case has also been made for reduction in differential in tax rates between cigarettes and other tobacco products, besides removal of exemptions on tobacco products.