·
Unveils nine sector report -
Illicit Market: A Threat to Our National Interest
·
Illicit trade in tobacco products
- 9139 crore, mobile phones – 6705 crore, and alcoholic beverages – 6309 crore
causes maximum revenue loss to the exchequer
·
Illegal market for Alcohol &
Tobacco has been rapidly growing in Andhra Pradesh &Telangana
FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities
Destroying the Economy), today unveiled its nine sector report titled -
‘Illicit Market: A Threat to Our National Interest’. This is a quantitative
study evaluating the impact of illicit markets on various economic aspects in
the Manufacturing Industry including sectors like FMCG Packaged Foods and
Personal Goods, Computer Hardware, Automobiles, Mobile Phones, Tobacco &
Alcohol, and secondly - the Media and Entertainment Industry including the
Broadcasting and Motion Pictures sectors.
As
per the report, the total loss to the government estimated for 2014, on account
of the illicit markets in respect of the seven sectors manufacturing industry
is Rs 39,239 crores, up from Rs 26,190 crores in 2012. The loss is inclusive of both indirect and
direct taxes -- the indirect taxes component is Rs. 34,020 crore and direct
taxes is Rs. 5,218 crore.
The study has also discovered that during the course
of two years from 2011-12 to 2013-14, revenue loss to the Government has
grown-up exponentially by Rs. 13,049 crores, an increase by 49.8%. Amongst the
various sectors, the maximum revenue loss to the exchequer on account of
counterfeiting and illicit trade is attributed to tobacco products at 23%,
estimating a revenue loss of Rs. 9139 crores.
The
states of Telangana and Andhra Pradeshhave seen a significant growth in illicit
trade among these sectors in the last couple of years. It is one of the fastest
growing markets for illegal cigarettes and alcohol in the country. The supply
of legal cigarettes shows a decline, the illegal players have taken over this
market and is growing at a higher rate. In case of alchohol the illegal market
is growing significantlyin value and volume.These two sectors are amounting to
more than hundreds of crores in loses to the Telangana and Andhra Pradesh
Government.
Mr P.C.Jha, Adviser FICCI CASCADE and former Chairman, Central
Board of Excise & Customs said, “During the last twenty years, the volume of
the counterfeiting activity has increased 100 times and the size of trade in
counterfeited goods is 10% of the legal international trade (around 2% of the
world’s overall economic output).”
Quoting the recently released FICCI CASCADE study, Mr. Jha stated
that the loss to manufacturing related sectors has increased by 44.4% in the
two years, from Rs72,969 crore in 2011-12 to Rs 105,381 in 2013-14.
The
study also establishes a relationship between high taxes and availability of
illicit products. High tax rates tend to
exacerbate illicit markets by creating greater demand for cheap and counterfeit
substitutes. A significant reason for this being that high tariffs and taxes
create opportunities for those involved in illicit markets to step in and supply
‘reduced’ versions of the original product at lower prices. This is true for
the tobacco and alcohol Industry. These industries are not only highly taxed;
the tax structure is highly complex in nature. Besides, there are considerable
differences in tax rates between states which open up opportunities for illegal
cross-border trade.
Comparison
2012 -2014: Loss of Revenue to the Government (Crs)*
*Top four sectors
Mr
Deep Chand, Adviser FICCI CASCADE and former Special Commissioner of
Police, New Delhi said, “In the past few decades,
leading intelligence and law-enforcement agencies around the world have found
conclusive evidence of the increasing involvement of terrorist organizations in
counterfeiting, piracy and smuggling activities to fund their activities. While
several counterfeiting outfits are transferring portions of their proceeds to
terrorist organizations, some of these are set up for the sole purpose of financing
terrorism. The need of the hour is tangible actions to increase enforcement and
to impose increased punishments. This is imperative to reassure legitimate
business owners and consumers that the government is serious about protecting
right owners which, in turn, would elicit greater support for government
policies.”
Mr.
Ravi Verma, (IPS), Deputy Inspector General of Police, Telangana,shared his views about the extent of
the menace in the state and also highlighted the various initiatives taken by
the TelanganaPolice to curb this growing socio-economic threat. He also thanked
FICCI CASCADE for taking up the issue and said that the masses should say ‘NO’
to smuggled good.
Andhra
Pradesh and Telangana have seen a significant growth in cigarette illicit trade
among these sectors in the last couple of years. The illegal cigarette market
in these States have been growing at a fast rate. High VAT(Value Added Tax) on
legal cigarette industry, resulting in high prices for legal cigarettes, is the
key reason for such an impressive growth of illegal cigarette industry in these
State.
Most of the manufacturers of such illegal cigarettes in India evade the
high Central Excise Duty and State VAT and thus are able to offer their
products to consumers at rock-bottom prices. Prices of illegal cigarette packs
in Andhra Pradesh and Telangana are at one fifth of the price of a legal packet
which makes them very attractive to consumers, particularly youth and rural
population.
Smuggled
international contraband cigarettes are another big menace contributing
significantly to the alarming growth of illegal cigarettes in Andhra Pradesh
and Telangana. Recently there have been a number of seizures of smuggled
cigarettes by the government authorities in these States.Illegal cigarettes (
domestic tax-evaded plus smuggled contraband) are willingly pushed by the
trade because of high trade margins on
account of evasion of all kind of duties including Excise and State level VAT.
Most importantly smuggled cigarettes do not use domestic tobacco which are
grown extensively in Andhra Pradesh and Telenagana.Thus
increase in availability of smuggled cigarettes in the country affects
adversely the livelihood of tobacco farmers situated in Andhra Pradesh and
Telangana.
It
is thus clear that the objective of increasing revenue from the cigarette
industry with increase in VAT in States have been soundly defeated. State
governments loses heavily in revenue, traders of the states lose their business
to smugglers and anti-social elements and also tobacco farmer of the states are
losing their livelihood.Tobacco control objectives are defeated,income of the
tobacco farmers of the State are reduced,while illegal traders are filling
their coffers.
Several
steps have been taken by FICCI CASCADE to create large-scale awareness through
various initiatives organised across the country as part of a nation-wide
awareness campaign to highlight the issue and focus on the growing menace of
smuggling and counterfeiting. In pursuance of the CASCADE agenda, a seminar on
‘Curbing Counterfeiting and Smuggling – An Imperative for Indian Economy’ is
being organized in Hyderabad on October 16th, 2015.
The Chief Guest in the
seminar will be Shri Etela Rajender, Minister for Finance and Planning,
Consumer Affairs, Government of Telengana. The event will also be addressed by
prominent representatives of industry, consumer organizations and senior government
officials.
For further information, please contact:
Sudarshan D
M:- 81250 71566
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