GST on all tobacco products should be more than 40%

The sin tax is intended to pay for the damage caused to society by products like tobacco, and also to raise their prices to reduce their usage

Pic courtesy: Shutterstock
Pic courtesy: Shutterstock

Doctors, cancer patients have demanded that Goods and Services Tax (GST) on all tobacco products should be increased from 26 per cent to 40 per cent. This will go a long way in curbing the ill-effects of tobacco. The doctors’ community along with victims of tobacco are trying hard to convince the central government on the necessity to increase the GST on all tobacco products.

“Any GST rate, lower than 26%, would make tobacco products affordable to youth and other vulnerable populations. It will lead to severe tobacco epidemic, driving up healthcare costs and reducing economic productivity throughout the country,” said Dr Pankaj Chaturvedi, Oncologist, Tata Memorial Hospital, Mumbai. He added that fixing the GST rate lower than 40% would cause increased numbers of deaths every year.

The sin tax is intended to pay for the damage caused to society by products like tobacco, and also to raise their prices to reduce their usage.  “Fixing the tax rate at 26% would defeat both purposes. It would slash current revenues from tobacco and encourage consumption of tobacco products among vulnerable populations, including children and youth, by making tobacco products more affordable,” said Chaturvedi.

India has the second largest number of tobacco users (275 million or 35% of all adults in India) in the world. Of these, over 10 lakh die every year from tobacco related diseases. The direct and indirect cost of diseases attributable to tobacco use was a staggering Rs 1.04 lakh crore ($17 billion) in 2011. This amounts to a loss of 1.16% of India’s entire GDP.  The enormous public health costs are substantially borne by the public health system.

According to Dr Rijo John, Assistant Professor, IIT Jodhpur, “Compared to a GST Sin rate of 40%, imposing a 26% Sin rate would reduce total tobacco tax revenue by almost one fifth (17%, or roughly Rs.10, 510 crores) even if the government retains the current excise on tobacco products post GST. Clearly, 26% Sin rate is inadequate to maintain a revenue neutral position. It amounts to slashing tax burden on all tobacco products, since existing average Value Added Tax (VAT) rates are higher than 26% on most tobacco products.”

Approximately 48 per cent of men and 20 per cent of women consume tobacco (35 per cent of the adult population overall). Of these, at least 10 lakh are dying each year from tobacco related diseases. Bidis comprise 48 per cent of the tobacco market, chewing tobacco 38 per cent and cigarettes 14 per cent, so it is evident that bidis account for a very high percentage of tobacco-related deaths.

“I lost my husband at a young age due to tobacco. I am suffering because of a wrong ‘personal choice’ made by him. My two daughters and I were not only devastated both emotionally and financially by my husband’s premature death. How can even anyone think of giving any kind of subsidy to this factory of widows and orphans? Government should not support an industry that destroys 10 lakh families each year for amassing vulgar profits,” said Sumitra Pednekar, wife of Maharashtra’s Former Home and Labour Minister Satish Pednekar , who died of oral cancer.