Budget 2015: More tax on cigarette means more contraband tobacco intake, Y C Deveshwar

NEW DELHI: The more you tax cigarettes, the more is consumption of contraband tobacco products, said ITC Chairman Y C Deveshwar while expressing hopes of a "moderate Budget" this year.

It may be noted that ITC's revenue from cigarettes grew by marginal 0.62 per cent to Rs 4,141.94 crore for the third quarter ended December 31, 2014.

Cigarettes account for a little less than half of its total sales, which stood at Rs 8,800.22 crore in the October-December period.

"Evidence is very clear that the more you tax cigarettes, more consumption goes on to cigarettes, which are contraband and goes on to other forms of tobacco consumption," Deveshwar told a television channel in an interview.

"There is loss of revenue and there is loss to the Indian brand."

On his Budget expectations, he said: "I hope that it would be a moderate budget as far as taxation is concerned (on cigarettes)."

Elaborating on the reasons for meagre sales growth, ITC had said: "The combined impact of the sharp increase in excise duty and VAT is exerting unprecedented pressure on legal industry sales volumes.

"Besides adversely impacting the performance of the legal cigarette industry, this has led to sub-optimisation of the revenue potential from the tobacco sector."