SHILLONG: Tobacco traders in the state have expressed unhappiness over the hike in VAT on tobacco products as proposed and notified by the state government on Wednesday.
“The state government during its budget session had increased the Value Added Tax on tobacco products by 35 per cent. This would directly increase the VAT rate on cigarettes by 27 per cent,” one of the cigarette dealers in Shillong said.
The dealer who did not wish to be named stated that due to the increase of VAT on tobacco, the trade in Meghalaya may go into the hands of smugglers, terrorists and illegal manufactures.
According to dealers, cigarette industry makes a sizeable contribution towards the livelihood of over 30,000 traders both in rural and urban areas of the State as cigarette business plays a vital role in ensuring subsistence for a huge population of over 2.2 lakh which includes families and dependants of these traders.
“In the absence of coal mining, when the entire state has struggled to deal with employment issues over last few months, such an action would seriously hamper the economy of the tribal belts of the state”, dealers expressed.
They stated that when the Central Government in the recent Union budget, increased Central Excise Duty on cigarette by up to 25 per cent thereby widening the price gap between the legal cigarette and the illegal products the increase made by the State government has made the legal cigarettes even more expensive.
“High tax on cigarettes would force cigarette prices to go up, which in turn will increase the price differential in legal cigarettes compared to the illegally manufactured cigarettes in the state and smuggled cigarettes originating in the neighbouring states as well as in Bangladesh,” a trader from Jaintia Hills said.
He further said, “This would encourage illicit trading of cigarettes in the state. This situation would work in favour of smugglers and anti-social elements in the state’s cigarette trade and honest traders would be harassed, exploited and in turn forced to pull themselves out from the business.”
It is relevant to note here that the states of UP, Bihar, Tripura, Madhya Pradesh and Rajasthan, which had also increased VAT on cigarettes were faced with the problem of falling revenue due to increase in illegal cigarettes. All these states have since then reduced VAT rate on cigarettes and experienced significant increase in revenue from cigarette because of the end of illegal cigarette trade in the states.
