India: VAT on Cigarettes Coming Down: Report

Source from:  The Economic Times 03/23/2016

Three big states have not altered value added tax (VAT) on cigarettes, which will reduce the overall VAT rate used in calculation for cigarette prices from 26% last fiscal to 24% now, a report by Edelweiss said.

The report said Haryana government did not change VAT on cigarette in its budget tabled on Monday, while Maharashtra and Karnataka too did not change taxes on cigarettes. Even states like West Bengal, Tamil Nadu and Kerala did not change taxes on cigarettes in their interim budget.

"In the past two years, most of the state governments have been prudent on taxation in cigarettes as undue increase leads to inter-state smuggling and thereby volumes dip. In fact, in past 2-3 years five states namely Bihar, West Bengal, Madhya Pradesh, Punjab and Rajasthan have decreased VAT on cigarettes from earlier high levels," the report said.

The report said the Centre also took a moderate 10% hike in cigarette excise in the recently announced Budget which is an indication that the government is cognizant of the rising menace of illegal cigarettes and the proactive measures by the cigarette industry are being heard. Enditem