High tax rates, varying from state to state, tend to exacerbate illicit markets and generate greater demand for cheap and counterfeit substitutes. To overcome this problem, which is causing revenue loss, early implementation of Goods and Service Tax (GST) ensuring uniform tax regime was imperative, said and former Chairman, Central Board of Excise and Customs P C Jha, who is also Advisor FICCI CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy).
Talking to the Tribune, Jha said streamlining the complex tax structure by implementing GST would put a tab on counterfeiting activities and smuggling of alcohol, tobacco and other items from low tax state to high tax state.
Besides increasing cooperation amongst stakeholders (international and domestic regulatory agencies), there is a need to facilitate effective enforcement of standard quality parameters, stringent governance practices and implementation of existing laws, experts maintained.
Due to illicit markets, the losses in alcoholic beverages and mobile phones have risen by 151 per cent and 111 per cent, respectively, over the years. The maximum revenue loss to the government (about 23 per cent) in 2014 was caused by tobacco followed by mobile phones (17 per cent) and alcoholic beverages (16 per cent), they observed.
The ADGP (Law and Order) Sanjay Kundu said that the inclination towards buying cheap product needed to be changed. He said that liquor vends at the inter-state borders were a common sight and a large number of people could be seen on the liquor vend where the tax were low.
The experts further stated that Himachal being a tourist state attracting a significant number of foreign tourists, there was great demand for international cigarettes. Smugglers had flooded the market with international contraband cigarettes, which were pushed by the retailers because of high margins on them on account of evasion of Customs Duties and State Taxes.
The report released by FICCI CASCADE –“Illicit market: A threat to national Interest,” stated that the illicit markets eat into the share of genuine entrepreneurs whose sales are affected and profits are reduced.