Surging Cigarette Smuggling In India | Convey

Cigarette Smuggling In India: Is Your Cigarette Illegal?

6 Min Read |  April 14, 2021


According to the Smuggling In India Report (2019-20) presented by the Directorate Of Revenue Intelligence:

India has become the fourth-largest and fastest-growing illegal cigarette market in the world with smuggled ones accounting for a quarter of the domestic cigarette industry.

So, this is a question to all the cigarette consumers: 

Are you sure that your cigarette is legal and has not been smuggled? 

Please tell your views in the comment section below. 

Coming back to the topic, yes it is true that India is falling prey to illicit cigarettes and the trend has been increasing with the passage of every year. 

But, why is this so? 

Why is there a market-ready in India for illegally exported cigarettes? 

What is the entire saga? 

Interested to find? 

Well, then get on with the reading! 

Insights: Tobacco Market in India 

The Indian market forms the third-largest exporter and second-largest producer of tobacco in the world. 

Not only this, as per a research report published in 2019, the tobacco industry provides employment to nearly 46 million people in India.

Yes! It is that massive as it is a source of bread and butter for a significant portion of the population. 

In our country, tobacco is available primarily in two forms namely, cigarette tobaccos and non - cigarette tobacco. Out of this if we focus on the segment of cigarette tobacco, the facts will shock you a bit. Nearly 10% of the total consumption of cigarette tobacco is only legal and the government collects around 80% of its revenue from it. 

Tobacco Market in India - Tax Charged

The domestic production of cigarette is majorly done by ITC and other players in this industry are: 

Name Of The Company 

Market Capitalization 

(*As Of March 27, 2021)


Rs 259.593.52 crores


Rs 5,144.55 crores

Godfrey Philip

Rs 4,611.60 crores

The Indian Wood

Rs 248.85 crores

Golden Tobacco

Rs 72.32 crores 

NTC Industries

Rs 59.45 crores

Raghunath Inves

Rs 1.63 crores

All that you read above was a basic insight into the tobacco market in India. Despite being such a large industry, it faces its shares of challenges and these challenges are mainly borne by the cigarette tobacco segment. 

To find out these challenges, continue with the reading! 

Taxation Structure of Tobacco in India

Not only in most parts of the world but in India too, taxation is estimated to be one of the most effective steps to limit and to check tobacco consumption by the masses. 

In India, the taxation trend focuses on controlling tobacco usage. Hence, the tobacco products in the country are subject to a complex structure of taxes levied by both the centre and the state government. This is why the taxes imposed on cigarettes in India are one of the highest in the entire world. 

Tax Imposed on Cigarettes

What Are The Taxes Imposed On Cigarettes? 

The excise taxes are imposed by the central government and it is usually collected when the manufacturing takes place and they are charged in forms of ‘value-added taxes.’

Given below are the categories of the major taxes that are imposed on cigarettes by the central government. 

The National Calamity Contingent Duty (NCCD)

It was introduced in the year 2001, after the major earthquake that occurred in the western state of Gujarat. The National Calamity Contingent Duty is levied on cigarettes as a fund for aiding relief during any natural calamity. 

Basic Excise Duties (BED) 

The Basic Excise Duties are imposed on tobacco products including cigarettes. It differs for a variety of tobacco products. For instance, an excise tax duty of 64% is charged on cigarettes, 22% on Bidis and 81% on all chewing tobacco products. 

This simply depicts that a major chunk of revenue can be generated from the sale of these tobacco products. 

The taxation structure underwent several changes after the Goods and Services Tax was introduced in India. Once GST has implemented the tax burden on cigarettes multiplied because GST Compensation Cess was another tax that started to be charged on it. 


  • The highest GST rate of 28% is imposed on cigarettes by the central government. 

  • With this, the final price of cigarettes also includes GST Compensation Cess, Basic Excise Duty (BED) and National Calamity Contingent Duty (NCCD)

And, the taxation story does not end here, friends. In the past 2-3 years during the announcement of the Union Budget, there are changes made in the BED as well as the NCCD and it is usually increased in order to charge more tax on cigarette consumption. 

The Alternative: Illegal Cigarettes

How many of you have seen the dreadful depiction of adverse health issues (such as mouth cancer) of smoking on cigarette packets? Whether you are ist consumer or not, the picture on the cigarette packets is hard to ignore. 

But, the question is, does it really dissuade the consumers from buying it? 

Does it help to create a fear of the ill effects of cigarette smoking? 

Please share your views in the comment section below! 

The Indian government is increasing the tax on cigarettes every year and with that, it has implemented strict regulations such as the presence of pictorial representations of health warnings over the packets or age verification. 

So many regulations! 

But, we Indians are known for our ‘jugad’ (alternative arrangement) and most of the general public follows the notion of ‘rules are meant to be broken! And, this is where the need for an illegal cigarette and its smuggling finds its roots. The supply and demand of illegally traded cigarettes are surging because of the following reasons: 

  • Consumers want to save their money as they do not want to pay high taxes

  • Suppliers opt the way of smuggling because of low stringent border entry rules as well as high profits margins. 

Unlike the legal ones, illegal cigarettes are available at much cheaper rates and they do not face strict checks. Therefore, a number of people are lured towards illegal cigarettes as they have to pay less and they get cigarettes from foreign brands. 

Smuggling of Cigarettes in India: What do the Statistics Say?

The trading of illegal cigarettes includes locally produced cigarettes that are tax-evaded as well as smuggled from any foreign country.  Both of these segments combine to form one-fourth of the cigarette industry of India. Further, there three ways in which the trading of illegal cigarette is carried out and those are: 

Counterfeit: Cigarettes are made with no proper authorization of the legal owner. These are manufactured with the aim to cheat the consumers and skip the tax payment. 

Contraband: The cigarettes that are smuggled from any foreign country falls under this category. Smuggling lets the distributors skip the payment of domestic duties. 

Illicit White: Cigarettes are legally produced in one country but are smuggled in other countries (illegally) so that the manufacturers can skip the payment of duties. 

The Shocking Statistics of Cigarette Smuggling in India 

In order to understand how deeply this issue of cigarette smuggling is penetrated in India, have a look at the following stats and facts.

  1. The report presented by Euromonitor International, since the year 2005, the market of illegal cigarettes has doubled, making India the fourth largest market for illegal cigarettes on the world stage. 

  2. Between 2005 to 2019, the volume of illegal cigarettes that were sold rose from 12.5 billion to 28 billion. This means there was a total rise of 124% in the volume of illegal cigarettes sold in 15 years. 

Cigarette Smuggling in India - Statistics

  1. In the mountain belts of the northern part of India, the domestic brands are nearly absent from the local shops. In fact, the shopkeepers there encourage contraband cigarette packs that are smuggled to India through Nepal. 

  2. Every year, the Indian government losses Rs. 13,000-15,000 crores of revenue due to the smuggling of cigarettes and surging usage of the same. 

  3. The availability of contraband cigarettes can be easily found in most parts of the country because retailers gain higher trade margins. 

  4. Lastly, in the past three decades, the market share of legal cigarettes has declined from 21% to 10% despite a 47% increase in the consumption of tobacco by Indian consumers. 

Decreasing Market Share of Legal Cigarettes in India

It would not be wrong to quote here that the government is paying heavy prices for cigarette taxation due to the so-called ‘jugad’ pushed by the consumers and retailers in the shape of smuggling! 

Cigarette Smuggling Increased During Lockdown

On one hand, the world was struggling with the unknown, Covid-19 but it did not really stop the cigarette consumers and suppliers of illegal tobacco! 

During lockdown in the country, the cigarette smuggling did not stop and the trend continued through road transportation, trains and cargo luggage.  

For instance, in July 2020, the customs department suspected and revealed that the special trains that were running in wake of Covid-19 were being used for transporting smuggled cigarettes in different parts of the country.  

During the same month, the customs department got hold of 4.5 lakh sticks of illegal cigarettes (that belonged to a Paris brand) at Old Delhi railway stations. Those cigarettes were smuggled into Indian borders from Myanmar and Bangladesh and finally, it was getting distributed through Covid-19 special trains. 

Another shocking seizure made by the customs department at one of the stations in Delhi was that of 10 lakh illegal cigarettes of a Korean brand. And, the cost of the entire seized products was around Rs 1.2 crores. 

It is unbelievable how the smugglers could stoop so low! 


The smuggled cigarettes are available at lesser rates, they come with no warnings on the packs rather their packing is fancy and they belong to the foreign brand. 

But, are these factors bigger than your health? 

Aren’t these practices resulting in corruption? 

Consumers of illegal cigarettes do not realize that at times they are sold fake cigarettes that are low-quality products that can prove to be harmful to your body. So, not only is the government losing its revenue but the consumers are inviting serious health issues by using such contraband cigarettes. Smoking or usage of tobacco is anyway injurious to health, on top of that using cheap quality products post increased threats. 

The choice is yours! You want to be an informed consumer rather than a cool smoker using illegal foreign brands! 

Whatsapp Icon

Why you should subscribe to daily WhatsApp Newsletter ?