The Federation of Retailer Association of India has urged the government to reconsider a proposed hike in excise duty on legal tobacco products, warning that the move could severely hurt small retailers across the country. The industry body says a sharp increase in taxes risks shrinking margins for neighbourhood stores while pushing consumers toward cheaper and illegal alternatives.
According to FAI, tobacco products remain a key revenue driver for lakhs of small kirana stores and paan shops, especially in semi urban and rural areas. Any sudden increase in excise duty would directly impact daily cash flows for these retailers, many of whom are already dealing with rising operating costs and slowing discretionary spending.
The association has also flagged concerns around the unintended consequences of steep taxation. Higher prices on legal tobacco could strengthen the parallel market, benefiting unregulated and illicit operators who do not follow quality controls or pay taxes. This, FAI argues, not only harms legitimate businesses but also leads to revenue leakage for the government.
FAI has called for a balanced review of tobacco taxation that takes into account both public health objectives and economic realities. It believes that a more measured approach would help protect small retailers while maintaining stability in the legal market. The association has stressed that predictable and gradual tax changes allow businesses to plan better and adapt without sudden shocks.
Retailers say tobacco sales often support the viability of small stores by driving footfall and complementary purchases of everyday essentials. Any disruption to this cycle could affect employment and livelihoods linked to the informal retail ecosystem.
As the government evaluates its next steps, FAI hopes policymakers will engage with ground level stakeholders before finalising any decision. The association maintains that safeguarding small retailers is critical not just for commerce, but for sustaining millions of families that depend on local retail for income.
