Over Rs 58,000 crore in taxes lost due to illicit trade in FMCG, mobile, tobacco, alcohol industry: Ficci report

The Central government is estimated to have lost as much as Rs 58,521 crore in taxes in 2019-20 due to illicit trade in goods in 5 key industries.

A Ficci report, titled ‘Illicit Markets: A Threat to Our National Interests’ by FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), has identified FMCG, mobile phone, tobacco products and alcohol as the most affected industries- with the size of illicit markets in these industries at a little over Rs 2.60 lakh crore for the year 2019-20.

The FMCG industry alone accounted for 75% of the total illicit value of goods in five key industries. Tobacco products and alcoholic beverages- two highly regulated industries – account for nearly 49% of the overall tax loss in these industries.

The maximum number of jobs (7.94 lakh) were lost due to illicit trade in the FMCG packaged foods industry, followed by tobacco industry (3.7 lakh), FMCG household and personal goods industry (2.989 lakh), alcoholic beverages industry (97,000), and mobile phone industry (35,000).

The tax loss to the government due to illicit trade in these five sectors stood at Rs 17,074 crore (FMCG packaged foods), Rs 15,262 crore (alcoholic beverages), Rs 13,331 crore (tobacco products), Rs 9,995 crore (FMCG household and personal goods), and Rs 2,859 crore (mobile phones).

“The impact of the illicit market of these key industries on the economy is pervasive and significant because of the backward linkages of these industries with other sectors of the economy resulting in a multiplier effect. Higher the multiplier, higher is its overall effect on the economy,” the report said.

Of the total illicit market size of Rs 2.60 lakh crore, FMCG industry (household and personal goods, packaged foods) constitute over Rs 1.97 lakh crore. This is followed by alcoholic beverages at Rs 23,466 crore, tobacco products (Rs 22,930 crore) and mobile phones (Rs 15,884 crore).

The report highlights that to deal with the menace of illicit markets in India, addressing the demand and supply gap of legitimate goods, strengthening the domestic manufacturing sector, increasing awareness among consumers, rationalisation of tariffs to reduce tax arbitrage, creation of a conducive environment for innovation and better international coordination and cooperation are some of the way forwards.

“Overall, cooperation of all stakeholders and concerted efforts of the government, industry, consumers, and international bodies are needed to achieve the challenging and mammoth task of reducing illicit markets,” it said.

With PTI inputs

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