Union Budget 2022: PHDCCI urges govt to reduce tax on cigarettes, abolish NCCD on tobacco products

New Delhi: PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to consider appropriate budgetary support for reinstatement of benefits under the FTP for Tobacco and Tobacco Products (covered under Chapter 24 of the Customs Tariff) by way of inclusion under RoDTEP in the upcoming Union Budget.

Finance Minister Nirmala Sitharaman is scheduled to present the Budget 2022-23 next month.

In its pre-Budget memorandum PHDCCI has suggested that it would be appropriate to consider a reduction of tax on cigarettes which would help the legal industry to recoup volumes from the illicit trade and provide higher revenues to the Government. Any increase in taxes will provide further impetus to the illicit trade and adversely impact revenue collection.

The trade and industry body has sought for correction of the disproportionate rate of ad-valorem GST Compensation Cess of 36% for King-Size filter cigarettes (>75mm in length) to 5%, in line with the levy of 5% ad-valorem GST Compensation Cess on all the other length segments – this measure will help combat the contraband trade in international brands of cigarettes smuggled in to the country, the bulk of which belong to the King-Size filter segment.

It has also asked for introduction of a new segment of ‘less than 60mm length’ filter cigarettes with an appropriate tax levy to enable the legal cigarette industry to mount a serious challenge to the domestic duty-evaded cigarettes that are offered to consumers at Re.1 and Rs.2 per stick, i.e., prices that are lower than even the applicable taxes. Such a measure will help reclaim market share from the domestic illicit trade with consequential benefit to revenue.

PHDCCI said that government should consider extending the tax net to non-Flue Cured Virginia Tobaccos which constitutes more than 90% of tobacco consumption in the country. The audit trail generated by this levy will help eliminate large-scale downstream tax evasion by manufacturers of value-added products.

The trade body added that Tobacco and tobacco products are the only goods on which both National Calamity and Contingent Duty (NCCD) and GST are levied.  Continuation of NCCD is a retrograde step and, accordingly, the Government is requested to consider its abolition.