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For a change, no increase in cigarette prices in this year's Budget

Experts say the likelihood of a tax hike for tobacco products and cigarettes was low in this year's budget because it was hiked sharply in Budget 2020

Manoj Sharma | February 2, 2021 | Updated 16:57 IST
For a change, no increase in cigarette prices in this year's Budget
Cigarettes and tobacco currently attract 28 per cent GST

In a relief to smokers, no new tax has been announced on cigarette and other tobacco products in this year's Budget. There were speculations before the Budget that the Centre will hike sin tax in order to increase revenue amid financial crunch in wake of coronavirus pandemic. The government had raised cigarette prices sharply in Budget 2020.

"The likelihood of a tax hike for tobacco products and cigarettes was low in this year's budget as it was hiked sharply in Budget 2020," brokerage firm Edelweiss Securities said.

During the budget last year, Sitharaman said: "As a revenue measure, I propose to raise excise duty, by way of National Calamity Contingent Duty (NCCD) on cigarettes and other tobacco products. However, no change is being made in the duty rates of bidis."

FULL COVERAGE: Budget 2021

The NCCD, which is levied as duty on excise, on cigarettes was anywhere between 212% to 388% depending on cigarette stick sizes. This was raised by 6-7% for lower priced packs and 4-5% for premium packs.

Despite smokers cribbing over high taxes on cigarettes and tobacco products in India, the country is far below other nations in terms of tax burden. In a recent Tobacconomic report, India scored 1.88 out of 5 points in terms of tobacco tax burden. The score is slightly better than Southeast Asia that scored an average 1.82 and global average of 2.07. Many countries had an average of 4.5.

Also read: Budget 2021: Imported alcohol to attract 100% farm cess

Cigarettes and tobacco currently attract 28 per cent Goods and Services Tax (GST). Apart from the GST, the Centre also charges additional cess on cigarettes and other tobacco products.

Also read: Budget 2021: What's costlier, what's cheaper?

Meanwhile, Sitharaman has proposed a new cess of 100 per cent on imported alcoholic beverages. The Agriculture Infrastructure and Development Cess (AIDC) will also be levied on petrol, diesel, gold, silver and other items. Proceeds from this cess would be used for developing agricultural infrastructure, she said.

Subsequent to imposing the cess, the basic customs duty on imported alcoholic beverages has been reduced to 50 per cent "so that overall consumer does not bear additional burden on most of the items."

Also read: Budget 2021: Agri cess of Rs 2.5 per litre on petrol, Rs 4 on diesel

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