Over Rs. 58,000 cr in Taxes Lost due to Illicit Trade in FMCG, Mobile, Tobacco, Alcohol industry: FICCI report

Illicit trade in commodities in 5 important industries has cost the Central Government as much as Rs. 58, 521 crores in taxes in 2019–20.

An illicit trade in commodities in 5 important industries has cost the Central Government as much as Rs. 58, 521 crores in taxes in 2019–20.

According to a report by the Federation of Indian Chambers of Commerce & Industry (FICCI), the sale of illicit consumer goods like fast-moving consumer products, mobile phones, tobacco products, packaged foods and alcoholic beverages stood at Rs 2,60,094 crore in 2019-20.

Sanjiv Mehta, chairman of Hindustan Unilever Ltd., stated on Thursday that smuggling and counterfeiting of commodities have to be considered severe crimes in India. During the presentation of a FICCI report on the black market in India, he advocated for civil action against grey imports.

Mehta further said that there should be a legal lawsuit against grey imports because India is an official signatory to the World Trade Organization. The dark web is still used for the trading of counterfeit goods, despite the fact that packing quality has increased and the supply chain is once again flexible. China is also a major source of illegal goods.

According to the report titled “Illicit Markets: A Threat to National Interests,” India’s illicit market, which spans five key industries, has cost the country 3 million jobs. According to a report released by former Vice President of India, Venkaiah Naidu, the government suffered a $7 billion loss due to the counterfeit market in 2019-2020.

Referring to illicit imports from China, the former Vice President said that you can change your friends but not your neighbours.

Grey or illegal markets include counterfeiting, tax evasion, and smuggling, all of which are classified as organised crime. The World Economic Forum estimates that the global illicit market drains $2.2 trillion from the global economy, accounting for more than 3% of global GDP.

According to the report, India’s illicit market is worth 2.6 lakh crore. The Fast Moving Consumer Goods industry, household and personal goods, and packaged foods account for 75% of the total illicit goods value in India.

According to the report, India’s illicit market is worth 2.6 lakh crore. The Fast Moving Consumer Goods industry, household and personal goods, and packaged foods account for 75% of the total illicit goods value in India.

Fast Moving Consumer Goods (FMCG) packaged foods (25%), tobacco products (20%), alcoholic beverages (19.8%), and mobile phones (7.56%) were the other four industries with the highest number of illicit goods. In fact, the estimated tax loss to the government due to the trade of illicit goods in these five key industries was Rs 58,521 crore during the same period, according to the report. Tobacco and alcoholic beverages, two highly regulated and taxed industries, account for nearly 49% of the overall tax loss to the government as a result of illicit markets in these five key industries.

The Federation of Indian Chambers of Commerce & Industry (FICCI) said that because of the backward links between these industries and other sectors of the economy, the impact of the illicit market on the economy is significant.

According to the report, the Make in India campaign is reducing counterfeiting in mobile phones. Furthermore, India has also surpassed China to become the world’s second-largest mobile phone manufacturing nation in terms of volume.

Thought Arbitrage Research Institute (TARI) said that among products from small and medium-sized businesses, FMCG household and personal goods have the highest rates of counterfeiting. Although tobacco consumption has decreased, its underground market has not changed, and because it is the most heavily taxed substance, the government suffers the most loss.

The report was prepared by Thought Arbitrage Research Institute (TARI) for the FICCI Committee Against Smuggling and Counterfeiting Activities (CASCADE).

On the other hand, the COVID-19 outbreak also caused global supply interruptions, which gave criminals numerous chances to establish illegal marketplaces.

Despite a decline in consumption, alcohol still accounts for 20% of the illicit market due to strong regulatory and tax restrictions.

Anil Rajput, chairman of FICCI CASCADE, said that the boost of Jago Grahak Jago is the need of the hour. He added that action without awareness is pointless. Consumer-led movements are critical right now in India. They will cease to exist if buyers disregard illicit products. Every time an illegal good is purchased, the nation loses money. A country begins to pay taxes only when true commodities are produced.

Besides, the findings of the report are based on data from the Government of India’s Ministry of Statistics and Programme Implementation (MoSPI), such as the Annual Survey of Industries, Private Final Consumption Expenditure (PFCE), the NSSO survey, and the Directorate General of Commercial Intelligence (DGCIS).

The report also stated that because of the backward linkages of these industries with other sectors of the economy, the impact of the illicit market on the economy is pervasive and significant.

According to the report, methods such as increasing consumer demand and rationalizing tariffs, in addition to increasing domestic production, could help reduce the incidence of illicit trade in the country. Stronger punishment and the rule of law also serve as deterrents to illegal trade, according to the report.