February 25, 2000

Books
Budget Special
Columnists
Indian Tax
Insurance
Interview
Mutual Funds
NRI Tax
Personal Finance
Personal Banking
Real Estate
Stocks

Sector report: Cigarettes

Inputs: Tobacco and paper

Key Players: ITC, Godfrey Phillips India, VST Industries and GTC Industries

Tax structure

Existing Custom Duty		(in %)
Item	1998-99	1999-2000
Cigarettes	46.8	46.8
Existing Excise Duty		Rs per 1000 nos
Item	1998-99	1999-2000
Non filter
< 60mm	100	110
60mm – 70mm	370	370
Filter
< 70mm	550	550
70mm – 75mm	900	900
75mm – 85mm	1200	1200
> 85mm	1470	1470

Background

• This industry has been highly taxed traditionally. Excise duty and other taxes constitute more than 50 per cent of the sale price of cigarettes.
• Though cigarettes account for only 20 per cent of tobacco consumed in India, they contribute about 90 per cent of the excise duty paid by the tobacco industry.
• Industry growth has been negative in 1999-2000 with volume sales declining by 2 per cent compared with the previous year.
• The ban on the sale of cigarettes on railway platforms and in trains (which account for 5 ro 10 per cent of total domestic sales) has taken its toll on the industry.
• Restriction on smoking in public places imposed by certain states coupled with higher state levies and luxury taxes have dampened the growth of the industry.
• Medium term prospects for the cigarette industry are expected to be below average.

Expectations from the Budget

With the cigarette industry being one of the largest contributors to the exchequer, it seems near impossible for the government not to tax this sector further.

ALSO SEE:

What will Yashwant Sinha do?

How will personal taxes change?

Fiscal report card

SECTOR ANALYSIS:

Automobiles | Cement | Fertilisers | Hotels | Housing | Mutual funds
Paints | Paper | Petrochemicals | Pharmaceuticals | Power
Software | Steel | Tea and coffee

Tell us what you think about this special feature