ITC questions rationale behind airports selling duty-free cigarettes

Consumer goods major and cigarette maker ITC Ltd on Friday questioned the rationale behind selling duty-free cigarettes at Indian airports while other cigarettes produced in the country are subject to heavy taxation.

"Why should our airports sell duty free cigarettes," company chairman Y.C. Deveshwar asked at the Annual General Meeting here.

"Our 100 year old cigarette business is under severe regulatory pressure. A back-up plan had started 10 years ago," he said during a reply to a shareholder.

The industry veteran said duty-free shops are also providing a cover for smugglers.

"It also provides a cover for the smugglers," he said.

Referring to the revenue states and the centre earn by taxing cigarettes, he said, "Don't kill the golden goose that lays the egg".

The company had paid Rs.27,000 crore during 2014-15 to the exchequer in the form of various taxes. He said the company has taken up the issue of the taxation structure with the central and state governments.

"We are in communication with both centre and state government and hopefully next year there will be more rationalty," he said.

During the first three months of the current fiscal, ITC's cigarettes business, which accounts for the major chunk of its sales, fell nominally by 1.22 percent contributing Rs.4,149.61 crore compared to the contribution of Rs.4,201.06 crore during the first three months of the previous fiscal year.