Ironically, increase in tax on tobacco products has led to increase in the grey markets and lower tax collection in most Indian states, defeating the very purpose of imposing higher tax rates. Further, states with significantly higher taxes are losing revenues to neighbouring states with lower taxes, which are being fuelled by illegal players and often by organised criminals.

The study says grey market has increased from 15.7% in 2012 to 20.2% in 2014, causing a loss of Rs 13,130 crore to the industry and Rs 9,139 crore in revenue to the government. To curb it the study proposes, among others, uniformity in taxes on all tobacco products and streamlining of state levies on tobacco through implementation of GST. For further details please view our report…