Higher cigarette taxes bring down sales

Higher excise duty on cigarettes announced in the Union Budget last year and increases in value-added tax by Tamil Nadu, Kerala and Assam has resulted in a below-par performance in the quarter ending December 2014, tobacco giant ITC has said. 

"The cigarette segment revenue, as a consequence, remained flattish during the quarter," ITC said.

ITC reported a net profit growth of 10.4 per cent at Rs 2,635 crore in the December quarter against Rs 2,385 crore in the year-ago period, according to a story in the Business Standard on 22 January 2015. 

The below-par performance was a consequence of slow growth in the cigarette business. Revenue in ITC's cigarette segment grew 0.6 per cent year-on-year to Rs 4,142 crore. 

The Union Government in the 2014-15 Budget raised specific excise duty on cigarettes in the range of 11 to 72 per cent.

Kerala Government raised taxes of cigarettes by fifty per cent during the fiscal year 2014-15. From 20 per cent in 2013-14, cigarette taxes were raised to 22 per cent in the Kerala Budget 2014-15. In a mid-term post Budget revision, cigarette taxes were raised from 22 to 30 per cent in September 2014. 

Tobacco kills one million Indians every year and drains away Rs 104,500 crores as direct and indirect costs of treatment. 

The World Health Organisation has stated that increasing tobacco taxes is the most effective way to reduce consumption and save lives. It can also bring in much-needed resources to cash-starved economies.