Institute of Public Health (IPH) has appealed to the GST council to recommend a tax rate above 40 per cent on tobacco and classify it under the demerit category or sin products to attract maximum tax.
“We are also pressing the government to levy the highest possible tax rate under GST on all types of tobacco including cigarettes, bidis, smokeless tobacco and pan masala to discourage their consumption and addiction amongst Indians and safeguard public health,” Dr. Upendra Bhojani, assistant director, Institute of Public Health told Pharmabiz in a telecom.
Even while GST is underway, the government should ensure that it retains the excise duty on all tobacco items. Therefore both GST and excise duty could result in a 70 per cent tax levy, he added.
According to the IPH, direct and effective method to reduce tobacco consumption is to increase their price through tax increases. Higher taxes are particularly effective in reducing tobacco use among vulnerable populations covering youth, pregnant women, and low-income smokers. An increase in tobacco prices by 10 per cent decreases tobacco consumption by 4 per cent in high-income countries and by about 6 per cent in low- and middle-income countries.
India has the second largest number of tobacco users globally with 275 million or 35 per cent of all adults. Annually around 1 million Indians succumb to tobacco-related diseases. If the current trend continues, tobacco will account for 13 per cent of all fatalities in India by 2020. Tobacco-use imposes enormous health burden as tobacco-attributable direct medical costs alone are around 21 per cent of national health expenditure.
The current taxation system differentiates between various forms of tobacco products such as bidis, smokeless tobacco and cigarettes while imposing taxes. Considering that bidi smoking is considered to cause about 2 - 3 times greater nicotine and tar inhalation than cigarettes, due to the poor combustibility of the bidi wrapper and greater puff frequency needed to keep the bidi light, it is most critical that all tobacco products are included within GST and under the highest category for demerit or sin products to attract maximum tax, said Dr. Bhojani.
According to the WHO 2015 Report on the Global Tobacco Epidemic, India is among the few countries where cigarettes are affordable. Even as the industry is opposing the recommendations to impose the ‘sin tax’ rate of 40 per cent on tobacco, yet this taxation in India is way below global standards. Current rates for even cigarettes and smokeless is significantly less compared to World Bank’s 67 per cent tax levy of retail price and WHO’s tobacco excise taxes account for 70 per cent of the retail price, pointed out IPH.
Bidis comprise 48 per cent of the tobacco market as compared to chewing tobacco which is 38 per cent and cigarettes 14 per cent have been subjected to very low central and state taxes under the false pretext of protecting bidi rollers’ livelihood. However, the reality is that low taxes and exemptions only benefit the bidi industry owners.
Therefore, IPH appeals to the GST council that tobacco and tobacco products including bidis be taxed at the highest rate under GST with imposition of an additional central excise duty and a provision for states’ right to impose top-up taxes be retained, said Dr. Bhojani.