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Illegal cigarette trade causes huge loss
Business Economics - 08 May 2013

According to the FICCI study on "Socio-economic Impact of Counterfeiting, Smuggling and Tax evasion in seven key Industry Sectors" the estimated annual tax loss to government in the year 2012 is Rs. 26,190 crore. The maximum tax loss on account of smuggled and counterfeit products to the government is from the tobacco sector at Rs. 6,240 crore followed by FMCG (Packaged food) at Rs. 5,660 crore and FMCG (Personal Goods) at Rs. 4,646 crore. The study also reconfirms government estimates of 5% of medicines in the market being fake that has a direct impact on the health and safety of consumers. Tobacco sector continues to account for the highest revenue to tax percentage loss to the government at over 60% and West Bengal is no exception. The state of West Bengal is one of the growing markets for illegal / tax-evaded cigarettes in the country. These locally manufactured tax-evaded and smuggled cigarettes from across the borders have over 10% share of the cigarette market and are continuously growing in the state of West Bengal. These cigarettes are particularly popular amongst youth as they are available at a significantly lower price than the legal cigarettes.

It is an alarmingly large and well-organized business: with some of India's largest manufacturers of illegal cigarettes (based outside the State), supplying illegal / tax-evaded cigarettes to the state every month. West Bengal being a coastal State and sharing an international border with Bangladesh, Nepal & Myanmar, a huge quantity of cigarettes are smuggled inside the State from the neighbouring countries. Consequently, the government suffers estimated revenue loss of over Rs. 125 crore annually.

According to the Euromonitor report on Illicit Trade in Tobacco Products, India is the fastest growing and is already the world's fifth largest market for illicit cigarettes. As per Euromonitor, illicit cigarettes account for 18% of the industry volume in India and it has grown by 2 billion sticks in just 1 year (2011-2012). Though it continues to be treated as an economic offence, several international studies and reports point towards the nexus between cigarette/ tobacco funding of criminal syndicates. Citing findings by the US Department of Justice Bureau of Alcohol, Firearms and Tobacco (ATF), the International Tax and Investment Center (ITIC) reported that "organized criminal groups, including those with ties to terrorist organizations, are engaged in illegal trafficking of alcohol and tobacco products, including counterfeit tobacco products."

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