Budget 2018: Disincentivise cigarette smuggling through tax policy

Budget 2018

Ahead of the budget, farmers body FAIFA today asked the government to have a taxation policy that curbs cigarette smuggling, saying Indian tobacco growers are suffering due to it.

The Federation of All India Farmer Associations (FAIFA), claiming to represent farmers of commercial crops across Andhra Pradesh, Telangana, Karnataka and Gujarat among others, said steep increase in tobacco taxation in the recent past led to growth of smuggling of cigarettes in the country.

"We appeal to the government to have a taxation policy, that disincentivises cigarette smuggling," FAIFA General Secretary Murali Babu said in a statement.

FAIFA said seizure of smuggled cigarettes has doubled in the last two years indicating the increase in smuggling.

With the smuggled products cheaper, there has been a shift in consumption which affected Indian tobacco farmers adversely as the smuggled cigarettes do not use Indian tobacco, it added.

This has resulted in drop in earnings of Flue Cured Virginia (FCV) tobacco farmers which have shrunk cumulatively by more than Rs 3,300 crore since 2013-14, FAIFA claimed.

Babu said India has a huge and wide-spread dependence on the tobacco crop for livelihood.

"The socio-economic importance of tobacco and its employment-generation capacity should not be overlooked while framing tobacco taxation and regulatory policies in India," he added.

The government needs to accord top priority to agriculture in the budget as a major shortfall in kharif production resulted in a sluggish growth of farm sector in the second quarter this financial year, Assocham said on Sunday.

While the year-to-year agriculture GVA (Gross Value Addition) growth for the July-September quarter of 2017-18 dropped to 1.7 per cent from 4.1 per cent, measured on basic prices, the fall looks quite sharp at current prices from 10 per cent to 3.7 per cent.

It is attributed to a decline in food grains production by 2.8 per cent in second quarter of the current financial year from a handsome growth of 10.7 per cent in the similar period of 2016-17.

The Chamber observed that the shortfall in the second leg of the monsoon seems to have impacted the Kharif production.

"Besides, distress in prices of several agri-commodities would have also played a role in lower realisations as seen in the growth deceleration on the current prices," it said.

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