As per the report of Edelweiss – the online trading portal, this refusal will see a reduction in the overall VAT rate which is used in calculation for cigarette prices from 26 per cent in FY15 to 24 per cent FY16.
The report further mentioned that Maharashtra and Karnataka too have not changed taxes on cigarettes alongwith West Bengal, Tamil Nadu and Kerala.
“In the past two years, most of the state governments have been prudent on taxation in cigarettes as undue increase leads to inter-state smuggling and thereby volumes dip. In fact, in past 2-3 years five states namely Bihar, West Bengal, Madhya Pradesh, Punjab and Rajasthan have decreased VAT on cigarettes from earlier high levels,” mentioned Edelweiss report, as quoted by The Financial Express in saying.
In continuation to the report, the Centre has exercised a 10 per cent hike in cigarette excise, as announced in budget. This will be an effort from the government to put a stop to the rising hazards of illegal cigarettes.