Health Advocates Demand Increased Tax Rates on Tobacco Products

KL NEWS NETWORK

SRINAGAR

Demanding a greater tax rate on tobacco products under the new GST regime, various health advocates Tuesday cautioned the government against accepting any proposal which seeks to reduce the tax rates below 40 percent.

Importantly, the GST council meeting that concluded on October 20, last Month proposed a much lower ‘26% GST rate’ which would have significant impact on the revenue as well as the health of the people.

“There is certainly an overarching consensus that goods that are harmful to society categorized as “sin” such as tobacco be taxed at the highest rate under GST as recommended in the Chief Economic Advisor report which seeks a 40% GST sin rate on all tobacco products including cigarettes, bidis and chewing tobacco,” Voluntary Health Association of India, VHAI said in a statement issued here.

“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 will be well below the rate required to maintain a revenue neutral position for tobacco and will significantly reduce tax burden on all tobacco products since the existing average VAT rates themselves are higher than 26% on most tobacco products,” says Dr. Rijo John, Assistant Professor, IIT Jodhpur.

Interestingly, Tobacco-use imposes enormous health and economic costs on the country.  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.

“A much lower GST rate would make all tobacco products even more affordable to youth and other vulnerable populations, leading to the impact of the tobacco epidemic becoming more severe driving up health care costs and resulting in productivity losses. This will certainly lead to an increased number of fatalities per year, which is not a good news for any country. I firmly believe and urge that the government should tax the tobacco products at very high rate to ensure it discourages mass consumption,” said Dr. Pankaj Chaturvedi, Oncologist, Tata Memorial Hospital, Mumbai

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.

“The current tobacco tax differentiates significantly between various forms of tobacco products (such as bidis, smokeless tobacco and cigarettes). Continuing to sell cheap, virtually tax-exempt bidis to the underprivileged, even in the new GST system, will ensure that the poor continue to be trapped in vicious cycle of poverty and ill health, exacerbated by affordability and addiction which causes them to spend more on tobacco and less on food, healthcare and education. We would urge the central and state governments to tax all forms of tobacco including bidis at 40 percent under GST regime, to insulate the population from its ill effects,” said Bhavna Mukhopadhyay, CEO, VHAI.

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