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Run up to the Budget: Cigarettes sector

Inputs
Tobacco and paper

* Excluding CVD, which varies according to the size of cigarettes as given below.

• Cigarette being a highly taxed industry, its contribution to the state's exchequer has been continuously increasing. Its share in the total excise collections has increased from 7% in 1987-88 to 12% in 2000-01.

• Cigarette volumes (based on factory clearances) have registered a 4.6% y-o-y decline during the period Apr-Jan 01. Total sales of cigarette sticks in this period stood at 73,434 mn against 76951 mn in the corresponding period of the previous year. Higher tax incidence in this fiscal year coupled with competition from smuggled brands has been cited as main reason for the slowdown.

The Union Cabinet has recently approved the following

• A proposal to ban smoking in public places
  
  
• The Tobacco Products Bill 2000 which has prohibited the advertising of all tobacco products and banned the events sponsored by tobacco companies across the country.

Previous Budget (FY 2000-01) announcements

• Modvat credit allowed to cigarette manufacturers.

• Excise duty revised upwards by 5 % on all categories of cigarettes.

Pre-budget industry Wish List

• The Tobacco Institute of India (TII) has submitted its following pre-budget recommendations

• Excise duty rates on cigarettes to be pegged at current levels
  
  
• Introduction of single point levy system to eliminate the cascading impact of tax
  
  
• Specific duty structure on cigarettes as recommended by Tax Reforms Committee (TRC) should continue

Expectations from the budget

Though the players in the cigarette industry have urged the Government to maintain the current level of duties, an increase in excise duty is quite likely.

ITC, Godfrey Phillips India, VST Industries and GTC Industries.

Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001

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