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Illicit cigarette trade hits government revenues
Business Standard - 24 Feb 2013

The  tobacco sector continues for the highest revenue to tax percentage loss to the  government at over 60 percent and Tamil Nadu has emerged as the hotbed of  illicit cigarette trade in India. According to reports, the government suffers  an annual tax loss of Rs. 50 crore.

The  state is one of the growing markets for illegal/tax-evaded cigarettes in the  country, according to FICCI-CASCADE(Committee Against Smuggling and Counterfeit  Activities Destroying the Economy) organised a seminar on ‘Curbing  Counterfeiting and Smuggling-An Imperative for Indian Economy.’These locally  manufactured and smuggled tax-evaded cigarettes have a 5-10 per cent share of  the market and are continuously growing in Tamil Nadu. These cigarettes are  particularly popular among youth as they are available at a significantly lower  price than the legal cigarettes, said in the FICCI-CASCADE statement.
   
  “It is an alarmingly large and well-organised business with some of India’s  largest manufacturers of illegal cigarettes (based outside the state) supplying  over 30 million illegal/tax-evaded cigarettes in the state every month. Also,  Tamil Nadu being a coastal state, a huge quantity is also smuggled inside the  state from neighbouring countries. Consequently, the government suffers an  annual tax loss of over Rs 50 crore,”
 
  In Tamil Nadu, the state level taxes on cigarettes are currently at 20 per cent  (VAT), which is much higher than the VAT of 12.5 per cent introduced across all  states in 2007. Hence, tax evasion on cigarettes becomes an inviting  proposition in the state. High taxation on cigarettes in India is the key  reason for the large and growing market of illegal/tax evaded cigarettes.
 
  Despite accounting for only 15 per cent share of the total tobacco consumption,  cigarettes generate over 75 per cent of the tax revenue from tobacco.

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