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Indian Farmers Urge Tax Rollback on Tobacco to Curb Smuggling, Save Crops

The Federation of All India Farmer Associations (FAIFA) has urgently called on the government to roll back a steep excise duty hike on tobacco products, warning it will severely impact farmers and the agricultural supply chain. The group argues the tax increase contradicts earlier government assurances of revenue-neutral taxation for tobacco under GST reforms. FAIFA leaders contend that making legal cigarettes even less affordable will drive consumers toward illegal, smuggled alternatives, undermining the legal market. They stress the need for a stable tax framework that balances economic support for farmers with long-term public health objectives.

Key Points: FAIFA Urges Rollback of Steep Tobacco Tax Hike

  • Protect farmer incomes
  • Curb illegal smuggling
  • Ensure tax policy stability
  • Align with public health goals
2 min read

FAIFA urges government to roll back steep tax hike on tobacco products

FAIFA urges govt to roll back tobacco excise hike, warning it will hurt farmers, cause market glut, and fuel illegal smuggling.

"Current steep increase will render legal products unaffordable... accelerating consumer migration to illegal channels. - FAIFA"

New Delhi, Jan 2

The Federation of All India Farmer Associations on Friday urged the government to roll back the notified excise rates on tobacco products and revise them to revenue-neutral rates, to disincentivise smuggling, and support domestic agriculture.

A stable taxation framework, FAIFA noted in a statement, is necessary to sustain farmer incomes, protect employment across the value chain, and align economic policy with long-term public health goals.

The Ministry of Finance notification 'Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026' has imposed an excise duty of Rs 2,050-Rs 8,500 per 1,000 sticks, depending on cigarette length, effective February 1.

FAIFA said such a steep hike in taxes would force domestic manufacturers to raise prices of finished goods, which will lead to a drop in sales, hurting farmers supplies in return. This could cause a glut in the tobacco crop market in the near term, it added.

"While announcing GST 2.0 on September 4, 2025, Government had assured that in the case of tobacco products, GST would be charged at 40 per cent of the retail sales price, while the overall incidence of tax would be kept unchanged," said Murali Babu, President, FAIFA.

He further added that the farming community across India has been holding on to this assurance of revenue neutrality and had welcomed the government's decision to rationalise GST by restructuring rates and doing away with the 12 per cent slab, which helped reduce prices.

Appealing to the government, FAIFA leaders stressed that India's legal cigarette prices are already among the least affordable globally when measured against per capita income, as reflected in World Health Organization's (WHO) affordability index.

Current steep increase will render legal products unaffordable to a huge section of consumers, accelerating consumer migration to illegal channels, it argued. FAIFA appealed to the government to ensure that taxation policies do not punish those who have always remained within the law.

- IANS

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Reader Comments

P
Priyanka N
FAIFA has a point about smuggling. If legal products become too expensive, the illegal market will boom. We've seen this with alcohol and other goods. The government will lose revenue, and consumers will get unregulated, possibly more dangerous products. 🚬
M
Michael C
While I understand the economic concerns, we cannot ignore the massive public health burden of tobacco. The WHO affordability index is a health tool, not an economic one. Sometimes tough measures are needed for long-term societal benefit, even if they cause short-term pain.
S
Suresh O
The government gave an assurance of revenue neutrality. Going back on that hurts credibility. Farmers and small manufacturers plan based on such policies. This kind of volatility makes doing business in India very difficult. Stability is key for trust.
A
Ananya R
It's not just about cigarettes. Chewing tobacco and gutkha are huge problems in rural areas, causing so much oral cancer. If a price hike makes people quit, that's a good thing. But the government must have a plan to support the farmers affected. They shouldn't be left in the lurch.
K
Karthik V
The focus should be on helping tobacco farmers switch to other crops. Subsidies and training for alternatives like maize, pulses, or even horticulture. Taxing a harmful product is correct, but the transition for the agriculture sector needs to be managed, not abrupt.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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