Smuggled cigarettes eat into Tamil Nadu revenue


Tobacco products, mainly cigarettes, are being smuggled into Tamil Nadu from Karnataka and Andhra Pradesh, and this affects the revenue to the State exchequer, sources in the Commercial Taxes Department said.

The reason is that the value added tax (VAT) is higher in Tamil Nadu.

“Select brands of cigarettes, which cost 10-20 per cent less in Bangalore and Hyderabad, are being smuggled into the State and sold in retail outlets here,” a commercial tax officer told The Hindu . If the maximum retail price of a particular brand in Tamil Nadu is Rs. 80 for a pack of 10, it is Rs. 65 in Bangalore. Similarly, another brand sold at Rs. 58 here costs Rs. 47 in the two neighbouring States.

While the VAT here is 30 per cent, it is 20 per cent or even lesser in those two States. “Either the enforcement agencies should seize the smuggled products or the VAT should be lowered. If this is allowed to continue, the annual revenue loss to the exchequer could be Rs. 600 crore,” sources in the department said.

Meanwhile, the tobacco dealers said the sale of cigarettes had dipped sharply owing to the variation in the VAT in the recent past and the lopsided tax differential among the States.

Omnibus drivers said agents sourced cigarettes from their contacts in Bangalore and Hyderabad and sent them to different destinations in Tamil Nadu. “There is a sudden rise in cartons of tobacco in many omnibuses and regular lorries as it fetches them quick money,” a bus owner said.

An agent in Madurai admitted that he was procuring cigarettes worth Rs. 50,000 daily from Bangalore and selling them at a 10 per cent net margin to shops.

A senior official of the Commercial Taxes Department in Chennai said the government was aware of the tax anomaly. To discourage smoking, the VAT on tobacco products had been increased. But the lesser tax in other States would be looked into, he said.

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Printable version | Jan 24, 2020 10:12:06 PM |

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