Demand grows for levying heavy tax on tobacco products under GST

Approximately 48% men and 20% women, who constitute 35% of adult population, consume tobacco. Of these, at least 10 lakh are dying each year suffering from tobacco-related diseases

tobacco

Ahead of the crucial Goods and Service Tax (GST) Council meeting on February 18, public health groups have urged Union Finance Minister Arun Jaitley to tax all tobacco products, including bidis at 28% under the GST Regime.

They have also strongly recommended that tobacco products, including bidis, should be taxed at uniformly high rates under new indirect tax framework, expected to start from July 1.

Dr Pankaj Chaturvedi, Oncologist, Tata Memorial Hospital (Mumbai), said, “I see no logic in giving tax subsidy to a product that carries a warning that it kills. In fact, it is the cheapest and unregulated poison available in the market. With the current tax pattern, the nation and its consumer is the loser, whereas a handful of business families (bidi and chewing tobacco industry owners) are making vulgar profits by selling this weapon of mass destruction.”

Approximately 48% men and 20% women, who constitute 35% of adult population, consume tobacco. Of these, at least 10 lakh are dying each year suffering from tobacco-related diseases. In tobacco market, 48% is accounted to bidis, 38% to chewing tobacco and 14% to cigarettes. Evidently, most deaths are attributed to rampant consumption of bidi in India.

“At least 10% increase in effective excise on tobacco product has almost been a norm in the past several years. A mere 6% increase in excise duty on tobacco came as a boon for tobacco industry, but it is a major setback for the public health interests of our country. We hope that the finance minister ensures a significant increase in tobacco taxation and decrease affordability of tobacco products while finalising GST reform,” said Ashima Sarin, Director of the Voice of Tobacco Victims (VOTV).

With total tax burden currently at 53%, 19.5% and 56% respectively for cigarettes, bidis and smokeless tobacco, taxation in India is much lower than the level recommended by World Health Organisation (WHO). As per its recommendation, tax burden should represent at least 75% of retail price.

With tax increase of 6%, lower than at least 10% increase witnessed in previous budgets, this year’s Union Budget did not address this anomaly.

There is a prevalent observation among the doctors fraternity that tobacco industry cleverly exploits its consumers. So, its prices are increased more than the tax increases that government proposes every year.

“It is unfortunate that the government doesn’t take a cue from this and increase taxes on tobacco products substantially. As against a normally expected 10% to 15% increase in taxes on tobacco products, a mere increase of 6% announced in the budget is a boon for the industry. Unless corrective measures are taken in impending GST by bringing all tobacco products under highest demerit rate of 28% + the highest possible cess, it would be a severe blow to the public health in India,” said Dr Rijo John, Assistant Professor, IIT Jodhpur.