· High taxes on Make-in-India products are causing huge demand for Smuggled and Counterfeit products in the country
· Appeals to the Finance Minister to make provisions in the Union Budget 2023-24 to reduce the relevant taxes and save millions of poor and small shopkeepers from being forced into being part of illegal trade
New Delhi, 17 January 2023: Federation of Retailer Association of India (FRAI), a representative body of about 80 lakh micro, small and medium retailers from across the country with a membership of 42 Retail Associations from Northern, Southern, Eastern and Western parts of the country has raised the concern against high taxes on daily consumption items incentivising illicit trade in the country. The high taxes are creating a huge demand for smuggled and counterfeit products like cigarettes, mineral water, etc. across the country and are forcing millions of small and impoverished shopkeepers to deal with criminals and be part of this illegal activity. Hence as a pre-budget appeal, FRAI is seeking a reduction in taxes on such daily consumer products.
FRAI has made a representation to the Finance Minister appealing to protect the interests of its 80 lakh retailers. These retailers sustain their livelihood by selling goods of daily needs like biscuits, soft drinks, mineral water, confectioneries, cigarettes, etc. The small retailer’s pre-lockdown earnings were about Rs 6,000 – Rs.12000 per month which is barely adequate to feed a family. The slightly bigger shops or the medium retailers earn about Rs. 400 – Rs.500 per day whereas the micro retailers earn as little as Rs 200 per day.
Explaining the issue, Sh. Ram Asre Mishra, President, Federation of Retailers Association of India said, “For quite some time now there has been an alarming rise of smuggled and counterfeit products particularly in daily consumption products that are sold by our members. Such illegal products are easily available across the country including in rural markets and their share is around 25% to 30% of the total market.”
“Our members are mostly uneducated and belong to the lowest economic strata of the society. Many of them have borrowed money to run their shops instead of depending on the Government for employment. Smugglers and criminals involved in counterfeiting activities cause financial, mental and physical harassment to millions of our members to sell their illegal products. Being poor and the small business being the only livelihood for their entire family it becomes impossible for them to resist or stop trading in such illegal products.” Mr. Mishra added.
Various media reports suggest that Chinese companies based outside India and other dubious multinational companies are behind these criminal and anti-social activities. The primary reason for this alarming growth of Smuggled and Counterfeit products is extremely high taxes on the legal ‘Made in India’ items of daily consumption. Since Smuggled and Counterfeit products completely evade taxes they can easily outsell legally produced goods by selling at half price or even at one-third of the price of a particular item. This is causing the loss of thousands of crores in revenue for the Government of India.
To further explain the issue, cigarettes are a daily use item that is sold by lakhs of small and poor shopkeepers across the country. There are many media reports that highlight the huge market of smuggled and locally made counterfeit cigarettes. These illegal cigarettes evade taxes, are freely available and popular amongst millions of consumers. The price of a legal packet of 20 cigarettes with a length of 84 mm is typically more than Rs. 300. While a consumer can buy a smuggled packet of the same size and pack at Rs. 80 to Rs.150 depending on the brand, demand and supply prevalent in the illegal market. Smugglers and counterfeiters are able to sell at such low prices and make huge profits because they are able to completely evade taxes. In comparison consumers who buy legal cigarettes have to pay a very high tax of around 70%.
Sh. Vinay Kumar, Secretary, Federation of Retailers Association of India said, “Our members are law-abiding citizens of the country but some of our members have been forced into selling smuggled and counterfeit products because of huge demand for them, as they are significantly cheaper as compared to legal products. The poor shopkeepers don’t want to deal with smugglers and criminals, but they have to face extreme pressure including financial loss and even physical harm forcing them to sell the illegal products. All this happens because of high taxes on legal products.”
“These shopkeepers also have to face constant harassment from government agencies like FDA, the Health Ministry, Tobacco Control Cell etc. for stocking illegal and inferior quality goods. Caught between law enforcers, demanding customers and smugglers and counterfeiters, life has become intolerable for our members, the millions of small and poor shopkeepers.” Mr. Kumar added.
FRAI continues to advise its members not to engage in selling counterfeit or smuggled products but as business for legal products is shrinking, they have no choice but to fall prey to meet the minimum earnings needed to sustain their livelihoods. Millions of its poor members from across the country have requested FRAI to take up this issue with the Government so that they can lead an honest and peaceful life. Hence FRAI is making an appeal to the pro-poor government of the day to support legally produced Indian made products by reducing taxes on these daily consumption products. This will not only ensure a dignified life for the millions of poor shopkeepers and protect their livelihood but will also strengthen “Aatmanirbhar Bharat” and “Ease of Doing Business”.