New Delhi, Jan. 4 -- Brokerage houses have raised concerns that the government's sharp increase in cigarette taxation could trigger a significant rise in illicit cigarette trade, undermining both public revenues and the legal tobacco industry.
The concerns follow an unprecedented 40-50 percent increase in cigarette taxes, driven by a hike in GST from 28 percent to 40 percent and the introduction of a new excise duty structure on tobacco products. Analysts warn that the steep increase marks a departure from the calibrated tax approach followed over the past eight years.
Kotak Institutional Equities described the move as "two steps back," noting that gradual tax increases in recent years had helped stabilise volumes and enabled the legal ci...