Jammu, February 21, (Scoop News)-FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) in association with Space Communications organized a Debate Competition on the theme ‘Youth Against Counterfeiting and Smuggling’ here today in Delhi Public School to increase awareness among youth to fight against the menace of counterfeiting and smuggling.
Delivering the inaugural address at the competition, Nazir Ahmed Khan (Gurezi), Minister of State for Animal & Sheep Husbandry and PHE, Irrigation & Flood Control, Horticulture, Agriculture & Floriculture, invoked the spirit of nationalism to fight the evils caused by smuggling and counterfeiting among the students. He acknowledged that the problem was huge and the end consumer was the main sufferer.
He said that consumers are duped because they are not receiving their money’s worth. At the same time, the consumer ends up having lesser schools, hospitals and other facilities because the government loses revenue due to counterfeiting and smuggling. Mr. Khan emphasized the public risks caused due to the ever-increasing criminalization of the society and black money being generated through these means.
The tobacco sector continues to account for the highest revenue to tax percentage loss to the government at over 60% and Jammu & Kashmir is no exception. Jammu & Kashmir is one of the fastest growing markets for illegal/tax-evaded cigarettes in the country. These locally manufactured tax-evaded cigarettes have around 15% share of the total cigarette market and are continuously growing in Jammu & Kashmir. 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 in surrounding states), supply over 30-40 million illegal/tax-evaded cigarettes to the state every month.
Consequently, the government suffers revenue loss of over Rs. 80 crore annually. Illegal cigarettes are sold in the market at one-fifth the price of legal product, and the cost in terms of health of smokers of illegal cigarettes is incalculable. Illegal cigarettes pose a major health hazard 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.
In Jammu & Kashmir, the state level tax on cigarettes is currently at 40% (VAT), which is significantly higher than the tax compared to all India average tax as well as in most of the neighboring states of Jammu & Kashmir. Hence tax evasion due to interstate smuggling of cigarettes becomes an inviting and lucrative proposition in the state. Jammu & Kashmir is surrounded by many states and almost all these states have much lower cigarette VAT rate compared to Jammu & Kashmir.
Tax disparity between Jammu & Kashmir and its neighboring states has led to a high price differential for legal cigarette brands which has led to unprecedented smuggling/illicit trading from neighboring states into Jammu & Kashmir. The tax disparity compared to the neighboring states offer a price differential of approximately Rs. 22-25 lakh on every truck load of cigarettes, if brought in the state clandestinely. Such a huge incentive for cigarette smuggling is bound to attract anti-social elements not only from Jammu & Kashmir, but also from other parts of the country.
According to the Euromonitor report on Illicit Trade in Tobacco Products, India is the fastest growing and is already world’s fifth largest market for illicit cigarettes. As per Euromonitor, Illicit cigarettes accounts for 17% of industry volume in India and it has grown by 1.3 billion sticks in just one year (2011-2012).
. Deep Chand, Advisor, FICCI CASCADE, emphasised that an increase in excise and VAT rates will not curtail consumption of sin products instead it will lead to incentivising smuggling and counterfeiting therefore causing heavy losses to the exchequer. It is a myth that high rate of tax can reduce consumption of sin products and discourage purchase of such goods. On the contrary, it gives incentive to unscrupulous and anti-social elements for creating a major security threat to the nation. Hence tax arbitrage creates opportunity for smuggling and counterfeiting. Policy makers should ensure that there is moderation in taxation so that a win-win climate is created for the government and consumer.
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