Photo : Collected
The latest increase in value added tax (VAT) and supplementary duty (SD) is sending ripples through the cigarette market, as prices of different brands of this consumer item have gone up significantly.
Stakeholders expressed apprehension that the sudden hike in VAT and SD would spur consumer prices, dampen demand and ultimately affect the government revenue. It is also appreciated that the price-hike of cigarettes might lead to rise in sales of illicit cigarettes, dealing further blow to the expected revenue receipt.
As cigarette manufacturers release their products to the market after paying the revised taxes and duties, almost all types of cigarettes now cost an additional Tk 1-2 per stick.
VAT and SD on more than a hundred goods and services, including cigarettes, were revised upwardly on January 09. The price of cigarettes has been raised accordingly.
The National Board of Revenue (NBR) has already issued directives for using stamps and banderoles based on the new price levels.
The Foreign Investors’ Chamber of Commerce and Industry (FICCI), in a statement, said the tax and duty hike, without consultation with stakeholders, would affect business and investment.
The FICCI which represents 90 per cent of foreign direct investment (FDI) across sectors like tobacco, telecom, energy, and finance, also mentioned that such measures could deter future FDI by eroding investor confidence.
Dwelling on the matter, Shabab Ahmed Choudhury, Head of Corporate and Regulatory Affairs, BAT Bangladesh, stated, “BAT Bangladesh has been operating for 115 years and has been an active contributor to the nation’s revenue. Cigarette tax in Bangladesh already exceeds the level recommended by WHO (75%) and this decision to raise it to 83% raises significant concerns for the industry's long-term future. This change will result in series of unintended consequences – impacting the business footprint and investment, the illicit cigarette market, and the Government revenue long term. Moreover, the decision will negatively affect the livelihoods of approximately 4.4 million citizens connected to the extensive supply chain reliant on the tobacco industry and its associated sectors, including farmers, retailers, and distributors. We strongly urge the Government to hold stakeholder-inclusive dialogue with all relevant parties and reconsider this disappointing decision.”
A quick look at the price hike for each brand per stick in the retail market shows – Benson & Hedges – increased from Tk 18 to Tk 20; Gold Leaf – increased from Tk 13 to Tk 15; Lucky Strike – increased from Tk 10 to Tk 12; and Star – increased from Tk 8 to Tk 10. Derby, Pilot, and Hollywood are now priced at Tk 8 per stick, and Royals is now priced at Tk 7 per stick.
Each brand’s 20-stick packet has seen a price surge of Tk 20 – Tk 30. The wholesale prices for 20-stick packets are – Benson & Hedges – Tk 370; John Player Gold Leaf – Tk 280; Lucky Strike – Tk 210; Star – Tk 172; Pilot, Derby Style, and Hollywood – Tk 144; Royals – Tk 126.
According to the NBR order, for low-tier cigarettes, the price of a 10-stick packet has increased from Tk 50 to Tk 60 or more, with supplementary duty increasing from 60 per cent to 67 per cent. For mid-tier cigarettes, the price has increased from Tk 70 to Tk 80 or more, with supplementary duty increasing from 65.5 per cent to 67 per cent. For high-tier cigarettes, the price has increased from Tk 120 to Tk 140 or more, with supplementary duty increasing from 65.5 per cent to 67 per cent. For premium-tier cigarettes, the price has risen from Tk 160 to Tk 185 or more, with supplementary duty increasing from 65.5 per cent to 67 per cent.
Cigarette packets must contain banderoles, which are attached at the factory before being marketed. The government collects revenue through the sale of these banderoles. The NBR collects the highest revenue from the cigarette and tobacco sector. About 60 per cent to 80 per cent of the price of each cigarette stick goes toward taxes and duties. In the fiscal year 2023–24, the government earned Tk 37,915 crore in taxes and duties from the sector. This amount was paid by 31 companies selling cigarettes. In the previous fiscal year, the VAT department collected Tk 32,816 crore in taxes and duties from cigarette sales.
Messenger/Tushar
