In the first quarter of the current financial year, government authorities have uncovered as many as 61 cases of smuggled tobacco products like cigarettes and pan masala that amount to tax evasion of ₹104.38 crore.
As per government data, the Directorate General of Goods and Services Tax Intelligence (DGGI) and other authorities detected these cases during the April-June period.
Data by the Directorate of Revenue Intelligence (DRI) reveals a sharp spike by over 107 per cent in volume and 110 per cent in value of seizure of smuggled cigarettes between 2019-20 and 2023-24. In the current financial year up to June, 2025, customs field formations and DRI seized around 3.93 crore sticks of cigarettes.
According to available data, seizures of smuggled cigarettes by the DRI, Assam Rifles, CRPF and other enforcement agencies are estimated to have exceeded ₹600 crore during FY25, said P C Jha, former Central Board of Indirect Taxes and Customs (CBIC) chairman and adviser, FICCI CASCADE.
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High-margin goods like gold, tobacco, and alcohol, which are heavily taxed, also create a strong incentive for smuggling and tax evasion, often fueled by arbitrage and money laundering.
"Given the high incidence of taxation on cigarettes, the resulting revenue loss is massive. High tax rates create a premium on evasion and place an enormous burden on enforcement agencies to check it. With the government now preparing to simplify GST, this is a golden opportunity to moderate taxes on high-margin products, reduce the incentive for smuggling, and curb the growth of illicit trade," said Jha.
The Central Goods and Services Tax Act was amended by the Finance Act 2025, which empowers the government to establish a comprehensive track-and-trace mechanism for specified goods.
The mechanism requires manufacturers of tobacco products and related products, including pan masala, various forms of tobacco and tobacco preparations, to furnish detailed information about manufacturing within specified timelines.
Failing strict compliance with the track and trace provisions, penalty violations have also been introduced.
According to Think Change Forum Secretary General Ranganath Tannir, a third 40 per cent slab would increase ad valorem rates, distort markets, encourage grey trade in categories like tobacco, which are already witnessing very high illegal trade, and eventually hurt revenue stability.
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