NEW DELHI: The Directorate of Revenue Intelligence (DRI) has warned that cigarette smuggling is rising sharply across India, with seizures exceeding Rs 600 crore in 2024-25. Data show that between 2019-20 and 2023-24, confiscations more than doubled in both volume and value, despite stepped-up enforcement.
The North-East has emerged as the largest hub, accounting for nearly a third of all seizures. Maharashtra and Goa together represent about 20 per cent, reflecting the use of western coastal routes, while Tamil Nadu and West Bengal have also seen significant activity through maritime channels.
Industry experts say enforcement alone cannot curb the problem and argue that India’s tax structure is fuelling illicit trade.
Cigarettes already face one of the highest rates under GST, making them attractive for smugglers. A report by FICCI CASCADE estimates that one in four cigarettes sold in India comes from untaxed sources, costing the exchequer thousands of crores.
Calls are growing for a simplified GST with two slabs of 5 and 18 per cent.
Analysts warn that proposals for a third, higher slab could worsen grey-market activity. They cite Australia, where repeated tax hikes pushed excise duties to \$1.40 a stick. While official revenues have collapsed by a third since 2019-20, the black market has flourished, costing Canberra more than \$10 billion annually.
In India, the illicit cigarette market grew nearly 18 per cent between 2018-19 and 2022-23, according to FICCI. The DRI has highlighted the role of South-East Asian syndicates, with consignments often routed via Dubai before reaching Indian ports.
Parliament has been briefed twice this year on the issue. The Ministries of Health and Commerce told MPs that 3.93 crore sticks worth over Rs 100 crore were seized in just the first quarter of 2025-26. Ministers stressed that agencies including the BSF, CRPF and Assam Rifles are
intensifying their efforts.
The government has introduced new compliance measures, including real-time production reporting and unique identification codes under a “track and trace” system announced in the Union Budget. Officials say the aim is to tighten oversight of the supply chain and choke illicit production.
However, experts caution that without addressing high taxation, smugglers will continue to profit at the cost of both public health and government revenues.