New Delhi: In a move that could upset smokers, finance minister Nirmala Sitharaman in the Union Budget 2020 has proposed a roughly 10 per cent raise in excise duty on cigarettes across various lengths.
“I propose to raise excise duty, by way of National Calamity Contingent Duty on cigarettes and other tobacco products. However, no change is being made in the duty rates of bidis,” she said.
If companies don't pass on it, can impact them by 15-16 per cent. The price increase will be based on the length of cigarettes. Whereas, regular ones are 70 mm long, king size ones go up to 120 mm. Cigarettes sizes are usually measured by length and diameter.
Excise duty on cigarettes across various lengths increased:
65 mm: From Rs 5 per 1000 sticks to Rs 440 per 1000 sticks
B/w 65-70 mm: From Rs 5 per 1000 sticks to `Rs 440 per 1000 sticks
B/w 70-75 mm: From Rs 5 per 1000 sticks to Rs545 per 1000 sticks
75 mm: From Rs 5 per 1000 sticks to Rs735 per 1000 sticks
Calculations Suggest
Overall increase of ~6-8% Tax per Cigarette stick
If companies don’t pass this on, EBIT could be impacted by 11-13%
Assuming NCCD & Basic Excise Duty Clubbed
The Larger Negative
Basic Excise Duty of Rs 5/1000 sticks was added in Budget 2019
D-Street Feared this will increase in subsequent budgets
Now this will be an overhang in Future Budgets
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