India is witnessing a quicker rise in smuggling of cigarettes, with their seizure registering the highest annual increase of 79 per cent -- even more than that of gold -- says a report by FICCI-CASCADE.
In 2015-16, Rs 162 crore worth of smuggled cigarettes were seized, up from Rs 90.75 crore in 2014-15, according to the report titled 'Invisible Enemy - A Threat to Our National Interests'.
Smuggled fabric and silk yarn saw the second-highest increase in seizure at 73.8 per cent, with Rs 41.78 crore worth of items caught in 2015-16 compared with Rs 24.03 crore in 2014-15.
Gold, on the other hand, saw 61.6 per cent increase in seizure, with Rs 1,119.11 crore of smuggled yellow metal confiscated in the last fiscal compared with Rs 692.35 crore in 2014-15.
"The primary reason for the rise of smuggled cigarettes into India is the high taxes. Cigarettes smuggling is a low-risk, high-reward criminal activity because high taxes on cigarettes induce great financial incentive for smugglers to earn huge profits," the report reasoned.
Persistently, increasing taxes on cigarettes provide a lucrative opportunity for tax evasion due to tax arbitrage between the country of exports and in the importing country, the FICCI-CASCADE report added.
On the other hand, the smuggling in fabrics and silk and yarn is primarily driven by the demand-supply gap and the dependence on imports, it said.
India's dependence on imports of silk and yarn has seen a consistent increase over the last 5 years, having grown to 1.12 per cent from 0.8 per cent of the total pie. This clearly indicates that domestic production is highly insufficient to meet the growing domestic demand, in turn fueling smuggling in the sector, the report said.
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