Distributors of cigarettes are digging a deep hole into
the state exchequer by way of evasion of taxes. Stung by
the recent findings of the vigilance and enforcement
(V&E) wing, the state government has asked the
commercial taxes department to tighten the noose on the
wholesale distributors across the state.
As per preliminary investigations, the wholesale dealers
have been evading payment of value addition tax (VAT) to the tune of nearly Rs
300 crore annually. Sources said the V&E department came across this development
after carrying out surprise checks on the distributors in several districts last
month following complaints about fudging of records.
While the manufacturers were paying tax at their end after selling the stocks to
the distributors, the latter were not paying the taxes despite making huge sums
after selling the stocks to the retailers. The distributors have another tier of
dealers before the stocks reach the retailer in the guise of salesmen and were
not showing these sales figures in the original transaction records.
It all began when the V&E sleuths grew suspicious as to how the cigarette giants
have managed huge sales with the help of two or three distributors in a city
like Vijayawada. While the annual turnover of cigarette sales in the city has
been estimated at over Rs 150 crore, cigarettes worth another Rs 100 crore were
being sold in Krishna district.
"We have found during investigations that the distributors (C&F agents or
wholesalers) were making sales through several unauthorised dealers
(unregistered) in the name of salesmen. We have suggested to the government to
bring in all such sales into the dealer network for registration to plug the tax
evasion," B Narasimhulu, regional V&E officer, told TOI.
As per the rules, the government should get tax revenues at all the four stages
-- manufacturer, wholesaler, dealer (so far unauthorised) and retailer. There
are strong suspicions that the distributors were making huge money with the
active backing of the commercial taxes department.
The V&E sleuths found that in Krishna district alone the cigarette distributors
were avoiding payment of taxes to the tune of Rs 10.87 crore annually.
"The loss to the exchequer could be more than Rs 300 crore in the state,"
confirmed a senior V&E official of Nellore district. Curiously, cigarette sales
from the total manufactured tobacco sales are just around 18% whereas the
chewing tobacco (gutka, jarda) dominates with 48% sales and the remaining 32%
pertains to beedis.
Sources said the government would soon crack the whip on the sales of other
tobacco products as the distributors of gutkas could be following the same route
to avoid payment of taxes.
