Cigarette you smoke may become shorter yet pricey

Will you stop smoking the brand of your choice if the size gets shorter? Probably not, as long as the price doe not change. But what if not only the price gets steeper, even the size of the cigarette gets shorter?

Zee Media Bureau

New Delhi: Did you realise why your cigarette is getting short and shorter? That is because, cigarette manufacturers hammer down the size of cigarette, keeping the price unchanged, as the impact of taxes start affecting cigarette sales.

Will you stop smoking the brand of your choice if the size gets shorter? Probably not, as long as the price doe not change. Right? But what if not only the price gets steeper, even the size of the cigarette gets shorter? 

A government committee has proposed a 40 percent GST rate on tobacco and related products (and some others such as luxury cars, pan masala and aerated soft drinks).

The recommended standard rate for other products and services is in the range of 17-18%. The final word on the tax rate will be taken by the GST Council, a representative body made up of the Union finance minister and finance ministers of all the states.

This would means much steeper tax on cigarette companies. According to industry reports, in the last three years, excise and VAT on cigarettes at per unit level has gone up cumulatively by 98% and 124%, respectively.

As a result, cigarette sales volume are down by more than 15% for the last three quarters, a senior industry official said. The proposed GST rate if implemented will further impact sales of legal cigarettes and will trigger consumption to other forms of tobacco. 

In March this year, cigarette company ITC shortened its discount Bristol-brand cigarettes by 5 mm in response to a drop in sales- a direct outcome of the high tax on cigerretes. 

That 5-mm cut allowed Bristol cigarettes to evade the higher bracket of tax structure. India has complicated six-tier cigarette-tax system that considers the lenght of cigerrete, filters, etc, while computing tax on a particular brand. 

In India taxes on cigarettes constitute about 60% of the price of a best-selling pack of 20 cigarettes, against about 43% in the US.

As per the industry reports, currently, excise duty varies between Rs 1.28 per stick and Rs  3.37 per stick. States levy additional value-added tax (VAT). 

Tax on cigarette is lower in India compared to neighbouring countries, like in Bangladesh tax on cigarettes is 76% and in Sri Lanka is 73.8%.

With a much higher tax rate may mean that your cigarette is expected to cost much more, and at the same time may become a wee bit shorter too!