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Friday, May 7th, 2021

Freedom from Fakes and Smuggled goods

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Chandigarh, FICCI-CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) with support of Education Department, Chandigarh organized a youth festival on 28th November, 2013 on the theme of “Freedom from Fakes and Smuggled goods” to increase awareness among the youth to fight against the menace of counterfeiting and smuggling.  Around 200 students took a pledge to take proactive action and “Quit Fake” and “Fight Smuggling”.
Mr. Pawan Kumar Bansal, Member of Parliament &Former Union Railway Ministerinaugurated the event and invoked the pledge among students. In his address the MP congratulated FICCI CASCADE was initiating such an important movement and asked the students to actively join this movement in the interest of nation’s economy and security. He observed that the menace of counterfeiting and smuggling is not only harming the industry and the government but also tarnishing the country’s image.Mr. V K Singh, Education Secretary & Finance Secretary, Chandigarh delivered the special address. He stated the problem as huge and the end consumer as the main sufferers. He mentioned that consumers are duped because he is not receiving his money’s worth. At the same time the consumer ends up having lesser schools, hospitals and other facilities because government loses revenue due to counterfeiting and smuggling. Further the public risks an ever increasing criminalization of the society due toblack money being generated through these means. He said active involvement of students is a great initiative because idea planted in their minds is carried a long way.
 The competition focused on the detrimental effects of smuggled, counterfeit and fake goods on the health and safety of consumers, with specific topics like, “Say no to Fakes”, and “Does Black Money encourage crime in society?” The paintings created by the students also brought to fore the steps, which can be taken by consumers to avoid being duped into purchasing these fake products, with topics like “Be responsible: Insist on a bill”.
The Tobacco sector continues to account for the highest revenue to tax percentage loss to the government at over 60% and Punjab is no exception. The state of Punjab is one of the fastest growing markets for illegal / tax-evaded cigarettes in the country. These locally manufactured tax-evaded cigarettes have over 20% share of the total cigarette market and are continuously growing in the state of Punjab. These cigarettes are particularly popular amongst youth as they are available at a significantly lower price than the legal cigarettes. It is an alarmingly large and well-organized business: with some of India’s largest manufacturers of illegal cigarettes (based inside and outside the State), supply over 30 million illegal / tax-evaded cigarettes in the state every month. Consequently, the government suffers revenue loss of over Rs. 80crore annually. Illegal cigarettes are sold in the market at one fifth the price of legal product. The loss of revenue to the Government because of the illegal cigarettes trade is staggering, but, the cost to the health of smokers of illegal cigarettes is incalculable. Illegal cigarettes pose major health hazards to smokers because of the inferior manufacturing processes and the low quality of tobacco with high levels of tar & nicotine used for such products. One can well imagine quality of such illegal products which are sold at such low rates .
In Punjab, the State level Tax on cigarettes is currently at   55% (VAT), which is significantly higher than tax compared to all India Average tax as well as in most of the neighbouring States. Hence tax evasion due to inter-state smuggling on cigarettes becomes an inviting and lucrative proposition in the State. High taxation on cigarettes in India is the key reason for the large and growing market of illegal / tax-evaded cigarettes. Despite accounting for only 15% share of total tobacco consumption, cigarettes generate over 75% of the tax revenue from tobacco. According to the Euromonitor report on Illicit Trade in Tobacco Products, India is the fastest growing and is already world’s fifth largest market for illicit cigarettes. As per Euromonitor, Illicit cigarettes accounts for 18% of Industry volume in India & it has grown by 2 billion sticks in just 1 years (2011 - 2012).
 According to the FICCI study on “Socio-economic Impact of Counterfeiting, Smuggling and Tax evasion in seven key Industry Sectors” the estimated annual Tax loss to government in the year 2012 is estimated at Rs. 26, 190 crores. The study further estimates an annual sales loss to industry at a whopping Rs. 1,00,000crores. The key sectors which were included in the study were Auto Components, Alcohol, Computer Hardware, FMCG (Personal Goods), FMCG Packaged Goods), Mobile Phones and Tobacco. The highest loss to industry in terms of revenue is from FMCG (Packaged Goods) at Rs. 20,378 crores (23.4%), FMCG (Personal Goods) at Rs. 15,035 crores (25.9%), Auto Components at Rs. 9,198 crores (29.6%), Mobile Phones at Rs, 9,042 crores (20.8%) and Tobacco at Rs. 8,965 crores (15.7%). The maximum tax loss on account of smuggled and counterfeit products to the government is from the Tobacco Sector at Rs. 6, 240 crores followed by FMCG (Packaged food) at Rs. 5,660 crores and FMCG (Personal Goods) at Rs. 4,646 crores.
Mr. P C Jha, Advisor, FICCICASCADEemphasised that an increase in excise and VAT rates will not curtail consumption of sin products instead it will lead to incentivising smuggling and counterfeiting therefore causing heavy losses to the ex-chequer.  This is only a myth that high rate of tax can reduce consumption of sin products and discourage purchase of such goods. On the contrary this gives incentive to unscrupulous and anti-social elements in society creating a major security threat to the nation. Thus tax arbitrage creates opportunity for smuggling and counterfeiting. Policy makers should ensure that there is moderation in taxation so that we create a climate of win-win for government and consumer.
He further added that the citizens of the country are an important force to fight this socio-economic menace and consumers need to be vigilant towards their rights when making purchases they must strongly insist on a bill.
 Students expressed their thoughts vividly through this creative medium. FICCI CASCADE encourages the Gen-Next to take up this case and be a CASCADER as the youth of the country are an important force to fight this socio-economic menace and take a pledge that we would not buy fake and smuggled goods.



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