The SJM cautioned against a rising influx of smuggled foreign cigarettes into Bharat, warning that illicit trade is expanding through multiple channels and posing serious risks to domestic livelihoods.
File Photo: IANS
Concerns expressed by Indian small retailers about losing sales to illicit goods ahead of a steep increase in cigarette taxes, effective February 1, 2026, have found support from the Swadeshi Jagran Manch (SJM), an Indian economic and cultural organisation affiliated with the Rashtriya Swayamsevak Sangh (RSS).
The SJM cautioned against a rising influx of smuggled foreign cigarettes into Bharat, warning that illicit trade is expanding through multiple channels and posing serious risks to domestic livelihoods. Retailers’ bodies and the Indian Sellers Collective have also warned of the wider impact on livelihoods and the country’s vast retail chain.
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Agreeing with the concerns of small retailers, Dr Ashwani Mahajan, National Co-Convener of the Swadeshi Jagran Manch, said, “High taxes on sin goods have historically led to the expansion of black markets, with smuggled products—often benefiting foreign producers—filling the gap created by unaffordable legal prices. Policymakers should consider ground realities and avoid creating conditions where smuggling becomes the only alternative, thereby undermining domestic producers and honest retailers.”
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He added that a sharp rise in smuggling would disproportionately affect small shopkeepers and kirana retailers, who form the backbone of India’s retail economy.
“The majority of small retailers wish to earn an honest livelihood, but the unchecked spread of illegal products by unscrupulous elements distorts the market and creates unfair competition,” Mahajan said, calling for stronger enforcement against smuggling networks.
Smuggling remains a major menace in India due to porous borders and entrenched illicit supply networks—conditions that critics say are worsened when legal products become prohibitively priced.
Recent global examples underscore this risk, ranging from the shutdown of a cigarette manufacturing facility in South Africa after smuggled sales overwhelmed the legal market, to the detention of a former senior customs official in Azerbaijan in a high-profile tobacco smuggling case. These instances highlight how price distortions can fuel organised and systemic illegality.
Echoing concerns over the supply chain, the All India Consumer Products Distributors Federation (AICPDF), which represents distributors and wholesalers across the fast-moving consumer goods sector, said policy reforms must carefully consider unintended consequences at the ground level.
Dhairyashil Patil, National President of the AICPDF, said the federation supports the broader objective of GST reforms and views GST 2.0 as a positive step towards simplification and improved compliance. However, he cautioned that any sharp increase in taxes on legal sin products would severely harm the traditional brick-and-mortar retail system.
“Past experience clearly shows that steep tax hikes on legal products encourage smuggling and the spread of counterfeit goods. Such measures divert consumers towards illicit channels, causing significant revenue losses for law-abiding distributors and retailers. This shift not only weakens the organised distribution and retail ecosystem but also results in substantial losses to government revenues. More worryingly, it strengthens the parallel economy by boosting smuggled goods and directly benefits anti-social and anti-national elements that thrive on illegal trade,” he said.
Traditional brick-and-mortar retailers are already under immense pressure due to unfair competition from online platforms and quick-commerce players. Tobacco products remain among the few categories where small shopkeepers continue to have relevance and sustain their livelihoods. If this segment is also driven into the hands of illicit networks, it would be devastating for honest retailers.
Raising concerns over the impact of proposed legislation and recent increases in tobacco taxes, stakeholders said higher levies would make enforcement more challenging.
Abhay Raj Mishra, Member and National Coordinator of the Indian Sellers Collective, said the latest hike in tobacco taxes could worsen the already serious problem of smuggling and illicit sales.
“International experience from Australia clearly shows how overly aggressive tobacco taxation can backfire. Recently, Australia’s Health Minister acknowledged that the illegal tobacco market has ‘exploded’, prompting lawmakers to publicly appeal for a reduction in tobacco taxes, as enforcement measures have repeatedly failed,” Mishra said.
“The bigger danger is that once illicit syndicates become entrenched, it becomes extremely difficult to uproot them later, even if taxes are reduced. They penetrate official systems, build linkages with corrupt officials, and thrive alongside the formal economy. The time to act is now by averting this crisis in India through balanced taxation,” he added.
Trade bodies said a coordinated approach involving balanced taxation, a strengthened role for enforcement agencies, and closer monitoring of digital platforms is essential to tackle the growing challenge of smuggling and illicit trade. They warned that failure to act could have long-term consequences for the formal economy.
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