ECONOMY

Illicit trade in five industries costs exchequer Rs 58,521 crore in lost taxes

The exchequer is estimated to have lost Rs 58,521 crore in taxes in 2019-20 due to illicit trade in goods in five key industries, including FMCG, mobile phone, tobacco products and alcohol, according to a FICCI report released on Thursday. 

The report estimates the size of illicit markets in these industries at a little over Rs 2.60 lakh crore for 2019-20, with the FMCG industry accounting for 75 per cent of the total illicit value of goods in five key industries. 

“The estimated tax loss to the government due to illicit goods in these five key industries is Rs 58,521 crore,” notes the report titled, Illicit Markets: A Threat to Our National Interests, by FICCI's Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE). 

The two highly-regulated and taxed industries, tobacco products and alcoholic beverages, account for nearly 49 per cent of the overall tax loss to the government due to illicit markets in these five key industries. 

The maximum number of jobs (7.94 lakh) have been lost due to illicit trade in the FMCG packaged foods industry, followed by tobacco industry (3.7 lakh), FMCG household and personal goods industry (2.98 lakh), alcoholic beverages industry (97,000) and mobile phone industry (35,000). 

The tax loss to the government due to illicit trade in these five sectors stood at Rs 17,074 crore (FMCG packaged foods), Rs 15,262 crore (alcoholic beverages), Rs 13,331 crore (tobacco products), Rs 9,995 crore (FMCG household and personal goods) and Rs 2,859 crore (mobile phones). 

“The impact of the illicit market of these key industries on the economy is pervasive and significant because of the backward linkages of these industries with other sectors of the economy, resulting in a multiplier effect. Higher the multiplier, higher is its overall effect on the economy,” the report adds. 

Report By