Fake auto products,counterfeit cigarettes and fast moving consumer goods (FMCG) have flooded the market and have caused huge tax losses to the exchequer,a study by the Federation of Indian Chamber of Commerce and Industry has found.
Disclosing this here on Thursday,Rajinder Gupta,chairman of the FICCI advisory council (Northern states ) said that the tobacco sector sector continues to account for the highest revenue to tax percentage loss to the government and Punjab was no exception. He was speaking at a seminar Curbing counterfeiting and smuggling -an imperative for the Indian economy organised by the FICCI-CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy).
Punjab is one of the fastest growing markets for illegal tax-evaded cigarettes in the country . These locally manufactured cigarettes have over 15 per cent share of the cigarette market and are continuously growing in the state. 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-organised business with some of Indias largest manufacturers of illegal cigarettes (based inside and outside the state),supplying over 20 million tax-evaded cigarettes in the state every month, Gupta said.
The government suffers a revenue loss of over Rs 75 crore annually and illegal cigarettes are sold in the market at one fifth the price of the legal product. The loss of revenue to the government because of the illegal cigarettes trade is staggering,but,the cost to the health of smokers is incalculable. Illegal cigarettes pose major health hazards to smokers because of the inferior manufacturing processes and the low quality of tobacco with high levels of tar and nicotine being used for such products, he added.
The high taxation on cigarettes in India is the key reason for the large and growing market of illegal cigarettes. Despite accounting for only 15 percent share of total tobacco consumption,cigarettes generate over 75 percent of the tax revenue from tobacco. According to the Euromonitor report on Illicit trade in tobacco products,India is the fastest growing and is already worlds fifth largest market for illicit cigarettes. As per Euromonitor,Illicit cigarettes accounts for 18 percent of industry volume in India and it has grown by 2 billion sticks in just 1 years in the year 2011 – 2012, Gupta noted.
The FICCI study focussed on seven key industry sectors including the manufacture of auto components,alcohol,computer hardware,fast moving consumer goods,mobile phones and tobacco and concluded that the estimated annual tax loss to the government in 2012 was Rs 26,190 crore. The study further estimates that the industry suffers an annual sales loss of Rs 1,00,000 crore.