The Indian Government plans to halve the duty free tobacco allowance to 100 cigarettes, 50 cigars, or 125 grams of tobacco.

 

The announcement was made following last week’s budget by Finance Minister Arun Jaitley, who has also increased excise duties on domestic cigarette sales.

 

In his budget speech last week, Jaitley said: “…I propose to increase the specific excise duty on cigarettes in the range of 11% to 72%. Similar increases are proposed on cigars, cheroots and cigarillos.

 

“Likewise, the excise duty is being increased from 12% to 16% on pan masala [nuts, seeds, herbs and spices mixture-Ed] from 50% to 55% on unmanufactured tobacco and from 60% to 70% on gutkha and chewing tobacco.”

 

MORE ILLICIT TRADE?

The Tobacco Institute of India (TII) has instantly responded by warning that the domestic tax increase could lead to more smuggling and tax evasion in the domestic trade in particular.

 

Meanwhile, whether the reduction in the duty free allowances will require adjustments to the duty free L&T contracts held by Delhi Duty Free at Delhi Airport and also by DFS and Flemingo International at Mumbai Airport remains to be seen.

 

In a separate more positive move, the government has also increased the value allowance for expatriate air travellers returning to India from Rs.35,000 to Rs.45,000 ($583 to $750). Goods declared on arrival with a value in excess of this limit will be taxed at a rate of 35% by Indian Customs.