ITC Warns of ₹21,000 Crore Annual Tax Loss Due to Smuggled Misbranded Cigarettes
ITC Ltd, India’s leading cigarette manufacturer, has raised concerns over the rampant smuggling of misbranded Indian cigarettes into the country. In a letter to the Union Finance Ministry, the company highlighted that this illicit trade results in an estimated annual tax revenue loss of ₹21,000 crore and may be financing organized crime networks.
Smuggling Routes and Seizures
The letter points to the influx of counterfeit cigarettes from Southeast Asian and Middle Eastern countries into India via air, sea, land routes, and even speed post. The Directorate of Revenue Intelligence (DRI) reported seizing 9.1 crore cigarette sticks worth ₹179 crore in anti-smuggling operations during the 2023-24 fiscal year, marking a 33% increase from the previous year. Notably, over half of these seizures occurred through sea routes.
Economic and Agricultural Impact
Beyond the substantial tax losses, ITC emphasized the adverse effects on domestic tobacco farmers. The production of these counterfeit cigarettes abroad diminishes demand for Indian-grown tobacco, impacting the livelihoods of those in the agricultural sector.
Profit Margins and Market Dynamics
The smuggling of these cigarettes is driven by significant profit margins. Manufactured at approximately ₹4 per stick in countries like Cambodia and Vietnam, these counterfeit products can be sold in India at ₹15 per stick, undercutting the ₹18-20 price of legitimate Indian-made cigarettes. This price disparity, fueled by high domestic taxes and import duties on cigarettes, incentivizes the illegal trade.
Call for Enhanced Enforcement
ITC has urged enforcement agencies to intensify vigilance and collaborate with international counterparts to dismantle the illicit manufacturing and distribution networks of these misbranded cigarettes. The company warns that current seizures may represent only a fraction of the total volume of smuggled goods entering the Indian market.
Government Initiatives
The Indian government has been actively working to combat the smuggling of illicit goods, including cigarettes. The Directorate of Revenue Intelligence (DRI) has been instrumental in seizing contraband and enforcing laws to curb such activities.
