Tobacco tax hike sparks protests by farmers in Andhra Pradesh
Guntur: Thousands of tobacco farmers hit the streets with protests in various districts of Andhra Pradesh urging the govt to roll-back the excessive hike in taxes, and re-issue rates that are revenue-neutral to protect farmer livelihoods while discouraging smuggling. Farmers staged rasta rokos, dharnas and took out rallies in different parts of AP and Karnataka.
The farmers should slogans against the Centre’s unilateral decision to impose massive taxes on tobacco products.
Federation of All India Farmer Associations (FAIFA) has reacted sharply to the Centre's notification of the new duty rules on chewing tobacco, Jarda scented tobacco and gutkha packing machines.
FAIFA has expressed concern that such a steep hike in taxes, as against the govt statements around the revenue neutral transition from compensation Cess regime to alternative regime, would make domestic manufacturers to raise prices of finished goods, which will lead to a drop in sales, hurting farmers supplies in return. This could cause glut in the tobacco crop market in the near future.
FAIFA said that India’s tobacco tax regime is openly discriminatory against FCV tobacco growers from the states of Andhra Pradesh and Karnataka. FCV tobacco farmers are already suffering under the burden of extremely high taxation rate on cigarettes which were on per kg basis more than 50 times higher than for bidis and more than 30 times higher than for Chewing tobacco.
“Further, while FCV tobacco attracts more than ₹6 in tax per dose in the finished product, other tobacco forms used in bidis and chewing products are taxed at less than one paisa per dose. Such extreme disparity punishes the most regulated and compliant farmers.
The current steep excise hike is further widening this fiscal discrimination and will crush FCV growers and distort the entire tobacco economy," said FAIFA president Murali Babu. He said that Centre while announcing GST 2.0 in Sep assured that in the case of tobacco products, GST would be charged at 40% of the retail sales price, while the overall incidence of tax would be kept unchanged.
The farming community across India has been holding on to this assurance of revenue neutrality and had welcomed the government’s decision to rationalise GST by restructuring rates and doing away with the 12% slab, which helped reduce prices. “We are shocked to see that the promise has not been kept, and instead a sharp increase in taxes has been notified, at the cost of farmers livelihoods,” said Murali Babu.
FAIFA leaders stressed that India’s legal cigarette prices are already among the least affordable globally when measured against per capita income, as reflected in World Health Organization’s affordability index. Current steep increase will render legal products unaffordable to a huge section of consumers, accelerating consumer migration to illegal channels.
FAIFA urged the govt to roll-back the notified excise rates and revise them to revenue-neutral rates, to disincentivise smuggling, and support domestic agriculture. A stable taxation framework, FAIFA noted, is necessary to sustain farmer incomes, protect employment across the value chain, and align economic policy with long-term public health goals.
FAIFA warns that India already faces a serious smuggling challenge. As per industry and market data, India has emerged as the fourth-largest illicit cigarette market globally, with illegal products accounting for roughly 26% of total cigarette consumption. This growth has been driven primarily by tax arbitrage, where high and uneven taxation makes smuggled products significantly cheaper than legal ones.
A sharp increase in prices will cause the illicit market to expand rapidly, overwhelming enforcement efforts and leading to significant revenue loss for the exchequer.
The farmers should slogans against the Centre’s unilateral decision to impose massive taxes on tobacco products.
Federation of All India Farmer Associations (FAIFA) has reacted sharply to the Centre's notification of the new duty rules on chewing tobacco, Jarda scented tobacco and gutkha packing machines.
FAIFA has expressed concern that such a steep hike in taxes, as against the govt statements around the revenue neutral transition from compensation Cess regime to alternative regime, would make domestic manufacturers to raise prices of finished goods, which will lead to a drop in sales, hurting farmers supplies in return. This could cause glut in the tobacco crop market in the near future.
FAIFA said that India’s tobacco tax regime is openly discriminatory against FCV tobacco growers from the states of Andhra Pradesh and Karnataka. FCV tobacco farmers are already suffering under the burden of extremely high taxation rate on cigarettes which were on per kg basis more than 50 times higher than for bidis and more than 30 times higher than for Chewing tobacco.
“Further, while FCV tobacco attracts more than ₹6 in tax per dose in the finished product, other tobacco forms used in bidis and chewing products are taxed at less than one paisa per dose. Such extreme disparity punishes the most regulated and compliant farmers.
The current steep excise hike is further widening this fiscal discrimination and will crush FCV growers and distort the entire tobacco economy," said FAIFA president Murali Babu. He said that Centre while announcing GST 2.0 in Sep assured that in the case of tobacco products, GST would be charged at 40% of the retail sales price, while the overall incidence of tax would be kept unchanged.
The farming community across India has been holding on to this assurance of revenue neutrality and had welcomed the government’s decision to rationalise GST by restructuring rates and doing away with the 12% slab, which helped reduce prices. “We are shocked to see that the promise has not been kept, and instead a sharp increase in taxes has been notified, at the cost of farmers livelihoods,” said Murali Babu.
FAIFA leaders stressed that India’s legal cigarette prices are already among the least affordable globally when measured against per capita income, as reflected in World Health Organization’s affordability index. Current steep increase will render legal products unaffordable to a huge section of consumers, accelerating consumer migration to illegal channels.
FAIFA urged the govt to roll-back the notified excise rates and revise them to revenue-neutral rates, to disincentivise smuggling, and support domestic agriculture. A stable taxation framework, FAIFA noted, is necessary to sustain farmer incomes, protect employment across the value chain, and align economic policy with long-term public health goals.
FAIFA warns that India already faces a serious smuggling challenge. As per industry and market data, India has emerged as the fourth-largest illicit cigarette market globally, with illegal products accounting for roughly 26% of total cigarette consumption. This growth has been driven primarily by tax arbitrage, where high and uneven taxation makes smuggled products significantly cheaper than legal ones.
A sharp increase in prices will cause the illicit market to expand rapidly, overwhelming enforcement efforts and leading to significant revenue loss for the exchequer.
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