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Cigarette prices are set to go up by almost as much as 47 per cent, following the hike in excise duty on tobacco products by 11-72 per cent.
This would effectively increase the price of a packet of long cigarettes to about ₹250, from the current ₹170. The cost of short length cigarettes are likely to increase by 20-25 per cent.
Jaitley also said excise duty on pan masala is being increased to 16 per cent from 12 per cent, on unmanufactured tobacco from 50 per cent to 55 per cent and on gutkha and chewing tobacco from 60 per cent to 70 per cent.
The Government expects to garner tax revenues of ₹1,100 crore from surcharge on pan masala and tobacco products, against ₹1,025 crore collected during the previous fiscal.
The tobacco industry is less than happy. They claim this move will neither generate more revenue nor decrease consumption.
“The extremely steep excise duty increase on cigarettes will provide a further fillip to the growing illegal trade in India, which is already a significant 19 per cent of overall cigarette industry,” said Syed Mahmood Ahmad, Director, Tobacco Institute of India.
Jaitley also announced an additional duty of excise at 5 per cent on aerated waters containing added sugar — drinks such as Coca-Cola and Pepsi. The decision has caused concern among industry members. “Whether we will be adjusting our price points, reworking volumes or fine-tuning marketing expenses is a key decision that will be taken after analysis of all the key factors that determine our pricing strategy,” said Nadia Chauhan, Joint Managing Director, Parle Agro Pvt Ltd.
The Indian Beverage Association said soft drinks is already one of the highest taxed categories and this increase would cause a major slowdown at a time when demand growth has been sluggish.
Urging the Government to reverse this tax hike, the association said the industry will otherwise have no option but to increase prices, which would fuel the spread of spurious beverages, which will, again, take away tax revenue.
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