Jump to full article: The Economic Times (India), 2009-09-28
Author: Anuradha Himatsingka, ET Bureau
Intro: Discriminatory taxes on cigarettes have not helped reduce the tobacco consumption in the country, says ITC divisional chief executive (tobacco division) Kurush Grant. In an exclusive chat with ET, he says that the move has only led some consumers moving to smuggled and tax evaded cigarettes:
What are your views on discriminatory taxes on cigarettes vis-a-vis other tobacco products?
Though cigarettes account for less than 15% of the total tobacco consumed in India, it contributes more than 90% of the total tax revenue collected from the tobacco industry. While the intent of the government has been to reduce the aggregate consumption of tobacco, extremely high tax rate on cigarettes has only served to squeezed demand for the cigarette form of tobacco, even as total consumption of tobacco in the country continues to grow. . . .
Q. Will implementation of GST impact the movement of smuggled contraband cigarettes which already enjoys an illegal advantage of tax arbitrage? Please elaborate.
KG: It will depend entirely on the manner in which GST is implemented on tobacco. A single point, first point specific excise duty subsuming all other taxes would certainly be the more revenue efficient methodology.
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