Have a Tax Rate That Disincentivises Cigarette Smuggling: Farmers' Body

New Delhi: Farmers' body FAIFA on Monday asked the government to have a taxation policy that disincentivises cigarette smuggling in India, ahead of a crucial meeting of the GST Council later this week.

The Federation of All India Farmer Associations (FAIFA), a non-profit organisation representing farmers across states such as Andhra Pradesh, Telangana, Karnataka and Gujarat, said cigarette smuggling has hit tobacco farmers supplying to legitimate manufacturers in India.

It urged Finance Minister Arun Jaitley "to protect the interests of Indian FCV tobacco farmers through balanced and uniform taxation under GST".

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

He further said GST is an opportunity for the government to ensure illicit trade is eradicated from the country by removing distortions and address tobacco taxation in India.

It will bring back lost livelihood opportunities of the tobacco farmers, he added.

FAIFA said a steep increase in excise duty in the recent past has led to growth of smuggling of cigarettes in India due to the high tax arbitrage.

Illegal cigarette trade is more than 20 per cent of the cigarette industry in India, making the country the 4th largest and fastest growing illicit market in the world, it claimed.

It has resulted in revenue losses of approximately Rs 9,200 crore and is growing annually, it added.
A shift in consumption to smuggled cigarettes has affected Indian tobacco farmers adversely as the illegal cigarettes do not use Indian tobacco, FAIFA said.

The demand of the farmers' body comes ahead of the meeting of the all-powerful GST Council to be held in Srinagar on May 18-19, where it is expected to give final nod to four rules and also fix GST rates for major commodities and services.

The four rules pertain to how input tax credit is to be calculated and claimed, valuation of supply of goods and services, method for intimation for opting for composition levy and transitional rules.