New Tobacco Tax: A Double-Edged Sword Hurting Farmers and Fueling Smuggling

The Federation of All India Farmer Associations (FAIFA) criticized a new excise duty on tobacco, claiming it harms farmers' incomes while boosting smuggling. FAIFA said the increased rates contradict government tax reform promises and exacerbate the challenges of domestic tobacco production against a backdrop of smuggling and rising costs.

The Federation of All India Farmer Associations (FAIFA) has expressed concern over the government's recent decision to levy additional excise duty on tobacco products. The organization argues this will negatively impact farmers' income and lead to more smuggling in a market already burdened by illicit trade.

A new notification by the finance ministry introduced excise duties ranging from Rs 2,050 to 8,500 per 1,000 cigarette sticks based on length, effective February 1, 2026. FAIFA claims that this duty hike contradicts government assurances of revenue-neutral tax reform, impacting farmers across Andhra Pradesh, Telangana, Karnataka, and Gujarat adversely.

FAIFA warns that increased retail prices will drive consumers towards illegal products, decreasing demand for locally-grown tobacco. This situation threatens to widen the gap between legal and smuggled goods, undermining enforcement and government revenue, increasing challenges for the Indian tobacco sector.

(With inputs from agencies.)