expected to put cigarette along with other variants of
consumable tobacco, such as gutkha and paan masala,
under the so-called schedule D of VAT brackets, or the
highest one of 30%. This is the first time any product
is being put under schedule D.
Besides West Bengal, Rajasthan, Kerala, Assam, Jammu and
Kashmir and Tamil Nadu have lately raised VAT on
cigarettes. In these states, cigarettes attract VAT of
20-40%, while in other states, the tax is pegged at
Alongside, West Bengal is likely to raise the excise
duty on alcoholic beverages—or Indian made foreign
liquor in the tax department’s parlance—to 50% from 37%.
Mitra refused to comment on his tax proposals until they
were presented in the state assembly.
His statement of accounts presented to the state’s
lawmakers on 11 August showed he was expecting sales tax
collections in fiscal 2012 to go up by about 28.2% from
the previous year’s revised estimate to Rs.17,024 crore.
Alongside, excise duty in the current year could go up
by 33.4% to Rs.2,418 crore, Mitra had said in his budget
The state’s own tax revenues are expected to rise 23%
from fiscal 2011’s revised estimate to Rs.27,690 crore,
with significant increases coming from tax on motor
vehicles, stamp duty and registration fees. However,
these are unlikely to be raised, said the state
government officials cited above.
The country’s biggest cigarette manufacturer ITC Ltd has
always maintained differential tax structures across
states “encourages unscrupulous tax arbitrage” and leads
to “large-scale smuggling”. ITC refused to comment on
Mitra’s yet-to-be presented tax proposals.
The sharp increase in VAT on cigarettes may not in the
long-run generate more revenues for West Bengal, but it
will “surely destroy the legitimate distribution
channel”, said the proprietor of a leading distributor
of cigarettes in Kolkata. He spoke on condition on
anonymity. “This has happened in every state that has
raised VAT on cigarettes to 20% or more,” he added.
“Such disruptive tax increases only benefit inter-state
While raising VAT on tobacco and spirits, Mitra is
expected to announce tax cuts on goods used by
physically challenged persons, costume jewellery and
some dress materials, according to state government
Livemint, India, dated