Taxation of Tobacco in India

In: Business and Management

Submitted By abhi5710
Words 1466
Pages 6
ECONOMICS ASSIGNMENT
Topic :TAXATION OF TOBACCO IN INDIA
By- Group 3

Q1.Interpret table 3.1 and 3.5.The team is asked to evaluate the future prospects of ITC's tobacco products in the rural areas based on the numbers in these two tables. Write a brief report explaining ITC's rural market potential based on the numbers in the case
According to the table 3.1, there is a minimal increase in the excise duty of unfiltered cigarettes in the years 2006-07 and 2007-08 and large increase can be seen in the year 2008-09. In the case of filtered cigarette, there has been a minimal increase or rather we can say that excise duty has been constant for 2007-08 and 2008-09.
In the case of bidis, the excise duty is constant for 2006-07 and 2007-08 while decreases in 2008-09. So we can make out from this given table that by increasing the cost of unfiltered cigarette the government wants people to shift from unfiltered to filtered cigarette which will eventually lead to betterment of public health. Secondly, it also helps the Government in the generation of revenue.
According to table 3.5, there has been an increase in consumption of bidis and less in cigarettes from 2000-01 to 2005-06. While due to the increase in price of bidis in the year 2006-07, the cigarette consumption of brands likeGold flake, Navy cut, Gold flake small and Wills flake has increased.
As the price is increased there would be less consumption of cigarette while on the other side the revenue generated would still be the same or slightly less because of increase in price therefore net sales will be the same without any significant loss.
So in order to maintain the revenue generated the quantity of cigarette manufactured will be reduced i,e less number of cigarette will be sold at a higher price
Q2: Based on the price elasticity estimates in table 4.2, explain own and cross price elasticities for the…...

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