With the tobacco traders planning to stay off the auctions, the farmers feared that the auction system will be severely affected and that they will face heavy losses.
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Taking serious exception to the reported imposition of central excise duty and Goods and Service Tax (GST) on unmanufactured tobacco, the tobacco traders have decided to stay off the tobacco auction platforms in Karnataka from January 24.
The Indian Tobacco Association (ITA), comprising tobacco traders, has in a letter to the Executive Director of Tobacco Board, Guntur, shared its concern over the reported recent imposition of central excise duty at 18% and GST ranging from 28% to 40% on unmanufactured tobacco.
“As you are aware, the cumulative tax burden proposed on unmanufactured tobacco is extremely high and unprecedented. This sudden levy has created severe uncertainty and financial stress for the trade and industry, making it practically impossible for buyers to accurately assess costs and participate meaningfully in the auction process,” Y.A. Chowdary, the association’s honorary secretary, said in the letter.
“In the absence of clear guidelines on the applicability, valuation and compliance mechanism relating to the said taxes, the members of the ITA are unable to participate in the tobacco auction purchases since they are required to move the tobacco already purchased at the auction on or before January 31, before the proposed tax measures come into force”, the ITA said.
The members will be unable to participate in the auction purchases from January 24 till clarity emerges and the issue is resolved, Mr. Chowdary said.
Meanwhile, the association has already represented the matter to the Union Minister for Finance and Union Minister for Commerce, requesting that the government to remove the proposed taxes on unmanufactured tobacco considering the adverse impact on growers, traders, exporters and the entire tobacco value chain.
A statement from the Federation of Flue Cured Virginia (FCV) Tobacco Growers’ Associations of Karnataka said that a delegation of tobacco farmers from Karnataka, Andhra Pradesh, and Telangana led by MP for Rajahmundry D. Purandeswari met Union Finance Minister Nirmala Sitharaman, along with Tobacco Board Chairman Yashwanth Kumar Chidipothu, to express serious concerns over the recent tax hike.
The tobacco farmers from Karnataka explained that auction prices had already declined by nearly 10%. With the tobacco traders planning to stay off the auctions in view of the imposition of 18% tax on unmanufactured tobacco, the farmers feared that the auction system would be severely affected and that they would face heavy losses.
Published – January 22, 2026 08:02 pm IST
