Jaipur, Ahead of a crucial GST Council meeting on February 18, several
leading public health groups have reached out to the Union Finance Minister
Arun Jaitley and his key advisers, urging them to ensure that ALL
tobacco products especially bidis, are placed in the demerit good category at
the 28% GST rate with an additional levy of the highest possible rate of cess. These
groups have also strongly recommended that tobacco products including bidis
should be taxed at uniformly
high rates under the new indirect tax framework expected to kick in from July
1.
The move is
significant as it comes just days ahead of the GST council meet which is
expected to discuss the rate slabs for different goods and services under the
GST mechanism.
With the
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 the WHO, according to which the tax burden should represent at
least 75% of the retail price. The union budget 2017-18 also did not address
this anomaly with an effective tax increase of 6%, lower than atleast the 10%
increase witnessed in previous budgets.
With 10 lakh
tobacco triggered deaths every year, public health advocates believe that the
government’s taxation policies in the tobacco sector have left public health
concerns unaddressed.
Classifying
different tobacco products in lower rate GST slabs will be a distortion and
will send a wrong message and promote the use of products like bidis. Bidis are
the most commonly used tobacco product in India, accounting for 64% of all
tobacco consumption and are disproportionately consumed by the poor.
Bidis contribute to the majority of the 10 lakh deaths attributable to tobacco
as well as the staggering economic burden caused by tobacco use.
The excise
increase proposed on tobacco products in the recent Union Budget of 2017-18
fell far short of even previous budgets, since the proposed increase in
Additional Duties of Excise and Basic Excise duties (BED) on various tobacco
products amounted to an increase of only 6% in the current budget. Most
importantly like earlier years, the budget also failed to increase the excise
taxes on tendu rolled hand-made bidis which almost 98% of the bidis smokers
consume instead increasing it on paper-rolled bidis which has a negligible
market share – once again keeping bidis a very affordable and practically
unregulated poison for its 67.5 million bidi users.
According
to Dr. Rijo John, Assistant Professor, IIT Jodhpur, “The
tobacco industry knows how to exploits its consumers and this is why it
increases prices much more than the tax increases that the 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%-15% increase in taxes on tobacco products, a mere increase of 6%
announced in the budget is a boon to the tobacco industry. Unless corrective
measures are taken in the impending GST by bringing all tobacco products under
the highest demerit rate of 28% + the highest possible cess, it would be a
severe blow to the public health in India.”
Taxation is
clearly the best way to tackle the tobacco threat as reiterated by research all
over the world including in India. It is critical that the total tax burden on tobacco under the GST
regime, does not fall below the current tax burden in order to achieve
revenue neutrality and maintain the current progress on public health.
India has the
second largest number of tobacco users (275 million or 35% of all adults in
India) in the world – of these at least 10 lakh die every year from
tobacco related diseases. The total direct and indirect cost of diseases
attributable to tobacco use was a staggering Rupees 1.04 lakh crore ($17
billion) in 2011 or 1.16% of India’s GDP.
Dr. Pankaj Chaturvedi, Oncologist, Tata Memorial Hospital, Mumbai “I see no logic in giving tax subsidy to a product that carries a product
warning that it kills. In fact, it is the cheapest and unregulated
poison currently available in the market. With current tax pattern,
consumer and the nation are losers, whereas handful of business families (bidi
and chewing tobacco industry owners) are making vulgar profits by selling
this weapon of mass destruction.
Approximately
48 percent of men and 20 percent of women consume tobacco (35 percent of the
adult population overall) - of these at least 10 lakh are dying each year
from tobacco related diseases. Bidis comprise 48 percent of the tobacco market,
chewing tobacco 38 percent and cigarettes 14 percent so it is evident that
bidis account for a significant portion of those deaths.
According
to, , Dr. Pawan
Singhal, patron of the Voice of Tobacco Victims (VOTV) and Associate Professor
of Sawai Man Singh Hospital, “At least a 10% increase in the effective
excise on tobacco product has almost been a norm in the past several years and
a mere 6% increase was a boon for the tobacco industry and a major setback for
the public health interests of our country. We hope that the honorable Finance
Minister will ensure a significant increase in tobacco taxation and decrease in
the affordability of tobacco products while finalizing the GST reform”
“Tobacco consumption has reached a dangerous level for consumers which
needs immediate attention by the law makers since it is making consumers poorer
and leaving their entire family vulnerable to cancers of the mouth, lung,
larynx, to name just a few tobacco related illnesses”. "It is a proven simple economics that demand falls with a
rise in price. Hence we need to raise taxes on tobacco, especially on bidis to
a higher level, to discourage its consumption and saving millions of lives.”
India cannot
move forward on its poverty alleviation and development agenda without addressing
the health concerns and untimely death of 67.5 million bidi users. It is
critical that the proposed GST structure and rate treats bidis at par with all
other tobacco products. Categorizing bidis in the demerit goods category
may be one of the most critical public health and revenue decisions that
honorable Finance Minister can take, which will impact the health and
well-being of Indians.
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