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Sharp Growth in Illegal Cigarette Trade in India Due Illegal cigarettes are sold cheap due to tax evasion affording a huge arbitrage High Cigarette taxation and extreme tobacco control regulations such as the opportunity. Availability of these products spreads across urban as well as 85% Pictorial Warning on Tobacco Product Packs in India have led to the rural markets – in metros they are almost universally available. SHARP GROWTH IN ILLEGAL CIGARETTE decline of Legal Cigarettes in the country while Illegal Cigarette Trade has grown significantly. According to Euromonitor International, illegal cigarettes have more TRADE IN INDIA DUE TO EXCESSIVE TAXATION than doubled from 12.5 billion sticks in 2005 to 26.5 billion sticks in 2018 Both high taxation on Cigarettes and extreme regulations produce counter- th th – accounting for 1/4 of the Indian Cigarette market. India is now the 4 AND EXTREME REGULATIONS ON CIGARETTES productive results. They do not reduce demand, but merely shift the demand largest illegal cigarette market in the world. from the Legal tax-paid and regulation-compliant products to Illegal tax- evaded and regulation non-compliant products. Incidents of Illegal Cigarette Seizure (Reported in Media) THE TOBACCO INSTITUTE OF INDIA Indexed to year 2016 According to a study by IMRB (Indian Market Research Bureau), since the 600 The Tobacco Institute of India (TII) is a representative body of farmers, implementation of 85% Pictorial Warning in India in April 2016, consumers 500 manufacturers, exporters and ancillaries of the cigarette segment demonstrate a noticeable preference for smuggled cigarettes without the 400 of the tobacco industry in India. The Institute is recognized as a prescribed warnings. 300 repository of reliable information on the industry and is privileged to INDEX 200 be consulted by Government, Parliamentary Committees, Chambers High taxation on cigarettes over the years particularly between 2012-13 and 100 of Commerce/Trade Associations and Media for information and 2017-18, has impacted the legal cigarette industry and provided a huge fillip 0 policy recommendations on Tobacco issues. to the illegal cigarette trade in the country. 2016 2017 2018 2019 (Jan - Nov) As an organization, TII has always supported evidence-based, equitable, reasonable and implementable regulation and recognises Sharp Growth in Illegal Cigarette Trade Seizure instances for the first 11 months of 2019 are more than double the the need to create greater awareness regarding tobacco consumption Index seizures reported in the entire calendar year of 2018. 136 in India. 2011 2018 % 36 + The reported seizures are only the tip of the iceberg of a much larger operation, Massive erosion of Legal Cigarette as for every seizure dozens of consignments escape any surveillance. This Volumes 100 100 is evidenced by the widespread availability and ubiquitous presence of % smuggled cigarettes across markets. 78 –22 Growth in illegal cigarette trade has many serious consequences: Legal Cigarettes Illegal Cigarettes - Results in revenue loss of Rs. 13,000 crores to the national exchequer - Aids the prevalence of organized criminal syndicates that control illegal Source: Cigarette Industry Factory Shipments & Euromonitor International trade in cigarettes - Undermines the tobacco control policies of the government by not The Goods and Services Tax (GST) regime introduced in July 2017, has further adhering to tobacco regulations increased the tax burden on Cigarettes by increasing the GST Compensation - Adversely impacts the demand for domestic tobaccos since contraband Cess rates by a weighted average of about 13% over the pre-GST tax rates. products do not use locally grown tobaccos Incidence of taxes on cigarettes after accounting for the GST Cess increase has trebled between 2012-13 and 2017-18. For more information, visit us at www.tiionline.org December 2019 2 1 Illegal cigarettes are sold cheap due to tax evasion affording a huge arbitrage High Cigarette taxation and extreme tobacco control regulations such as the opportunity. Availability of these products spreads across urban as well as 85% Pictorial Warning on Tobacco Product Packs in India have led to the rural markets – in metros they are almost universally available. SHARP GROWTH IN ILLEGAL CIGARETTE decline of Legal Cigarettes in the country while Illegal Cigarette Trade has grown significantly. According to Euromonitor International, illegal cigarettes have more TRADE IN INDIA DUE TO EXCESSIVE TAXATION than doubled from 12.5 billion sticks in 2005 to 26.5 billion sticks in 2018 Both high taxation on Cigarettes and extreme regulations produce counter- th th – accounting for 1/4 of the Indian Cigarette market. India is now the 4 AND EXTREME REGULATIONS ON CIGARETTES productive results. They do not reduce demand, but merely shift the demand largest illegal cigarette market in the world. from the Legal tax-paid and regulation-compliant products to Illegal tax- evaded and regulation non-compliant products. Incidents of Illegal Cigarette Seizure (Reported in Media) THE TOBACCO INSTITUTE OF INDIA Indexed to year 2016 According to a study by IMRB (Indian Market Research Bureau), since the 600 The Tobacco Institute of India (TII) is a representative body of farmers, implementation of 85% Pictorial Warning in India in April 2016, consumers 500 manufacturers, exporters and ancillaries of the cigarette segment demonstrate a noticeable preference for smuggled cigarettes without the 400 of the tobacco industry in India. The Institute is recognized as a prescribed warnings. 300 repository of reliable information on the industry and is privileged to INDEX 200 be consulted by Government, Parliamentary Committees, Chambers High taxation on cigarettes over the years particularly between 2012-13 and 100 of Commerce/Trade Associations and Media for information and 2017-18, has impacted the legal cigarette industry and provided a huge fillip 0 policy recommendations on Tobacco issues. to the illegal cigarette trade in the country. 2016 2017 2018 2019 (Jan - Nov) As an organization, TII has always supported evidence-based, equitable, reasonable and implementable regulation and recognises Sharp Growth in Illegal Cigarette Trade Seizure instances for the first 11 months of 2019 are more than double the the need to create greater awareness regarding tobacco consumption Index seizures reported in the entire calendar year of 2018. 136 in India. 2011 2018 % 36 + The reported seizures are only the tip of the iceberg of a much larger operation, Massive erosion of Legal Cigarette as for every seizure dozens of consignments escape any surveillance. This Volumes 100 100 is evidenced by the widespread availability and ubiquitous presence of % smuggled cigarettes across markets. 78 –22 Growth in illegal cigarette trade has many serious consequences: Legal Cigarettes Illegal Cigarettes - Results in revenue loss of Rs. 13,000 crores to the national exchequer - Aids the prevalence of organized criminal syndicates that control illegal Source: Cigarette Industry Factory Shipments & Euromonitor International trade in cigarettes - Undermines the tobacco control policies of the government by not The Goods and Services Tax (GST) regime introduced in July 2017, has further adhering to tobacco regulations increased the tax burden on Cigarettes by increasing the GST Compensation - Adversely impacts the demand for domestic tobaccos since contraband Cess rates by a weighted average of about 13% over the pre-GST tax rates. products do not use locally grown tobaccos Incidence of taxes on cigarettes after accounting for the GST Cess increase has trebled between 2012-13 and 2017-18. For more information, visit us at www.tiionline.org December 2019 2 1 Illegal cigarettes are sold cheap due to tax evasion affording a huge arbitrage High Cigarette taxation and extreme tobacco control regulations such as the opportunity. Availability of these products spreads across urban as well as 85% Pictorial Warning on Tobacco Product Packs in India have led to the rural markets – in metros they are almost universally available. SHARP GROWTH IN ILLEGAL CIGARETTE decline of Legal Cigarettes in the country while Illegal Cigarette Trade has grown significantly. According to Euromonitor International, illegal cigarettes have more TRADE IN INDIA DUE TO EXCESSIVE TAXATION than doubled from 12.5 billion sticks in 2005 to 26.5 billion sticks in 2018 Both high taxation on Cigarettes and extreme regulations produce counter- th th – accounting for 1/4 of the Indian Cigarette market. India is now the 4 AND EXTREME REGULATIONS ON CIGARETTES productive results. They do not reduce demand, but merely shift the demand largest illegal cigarette market in the world. from the Legal tax-paid and regulation-compliant products to Illegal tax- evaded and regulation non-compliant products. Incidents of Illegal Cigarette Seizure (Reported in Media) THE TOBACCO INSTITUTE OF INDIA Indexed to year 2016 According to a study by IMRB (Indian Market Research Bureau), since the 600 The Tobacco Institute of India (TII) is a representative body of farmers, implementation of 85% Pictorial Warning in India in April 2016, consumers 500 manufacturers, exporters and ancillaries of the cigarette segment demonstrate a noticeable preference for smuggled cigarettes without the 400 of the tobacco industry in India. The Institute is recognized as a prescribed warnings. 300 repository of reliable information on the industry and is privileged to INDEX 200 be consulted by Government, Parliamentary Committees, Chambers
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