According to a statement, practically all major countries in the world subject tobacco products, including cigarettes, to high rates of consumption taxes with a view to garner additional revenue on one hand and discourage its use on the other.
“The government should make tobacco prohibitively expensive in the GST era. There is no justification for giving any subsidy to a product that kills every second user prematurely,” Dinesh Trivedi, a Trinamool Congress parliamentarian, said.
Ashwini Kumar Chaube, BJP MP from Buxar, said: “As a former Health Minister of Bihar, I had banned gutka and raised taxes on tobacco products including bidi. I am sure the GST Council will put tobacco in the highest tax category. It will save millions of lives.”
The total direct and indirect cost of diseases attributed to tobacco use was a staggering Rs 1.04 lakh crore ($17 billion) in 2011 or 1.16 per cent of the GDP.
Tobacco-attributable direct medical costs are around 21 per cent of national health expenditure.
“It is shocking that there is no tax on Bidis in many states. All tobacco products should be taxed very high in the GST era. I see no logic in giving tax subsidy to bidi (or any tobacco product) in the GST,” said Pankaj Chaturvedi, Oncologist at Mumbai based Tata Memorial Hospital.
“With current tax pattern on bidi, consumers and the nation are losers whereas handful of business families are making vulgar profits.”
“Most of the bidi industry families wield great political clout. They violate every law related to minimum wages, child labour and healthy workplace. Excise and Tax violation remains rampant in this unorganised industry,” said Chaturvedi.
Even as the tobacco industry is opposing the recommendations of imposing sin tax rate of 40 per cent, it is important to note that tobacco taxation in the country is way below global standards.
According to Rijo John, Assistant Professor at IIT Jodhpur, “A recent report from WHO shows that current cigarette taxes as a percentage of retail prices in India are lower than even neighbouring countries such as Sri Lanka and Bangladesh and rank 80th in the world.”
“A 40 per cent GST rate plus central excise duty at the current level would just about maintain the current tax burden on tobacco products. It is also important to allow states to maintain their right to impose top-up taxes on tobacco products, in order to actually make tobacco products less affordable over time,” he said.
A comprehensive economic reform like GST offers the government an opportunity to tax tobacco at the highest rate and save millions of people from dying prematurely.
“All differentiations should be done away with regards to tobacco products and taxed at the highest slab under the GST, since lower tax rates would contribute to their affordability and end up promoting increased consumption amongst most vulnerable sections of population pushing them below the poverty line,” Bhavna Mukhopadhyay, CEO of Voluntary Health Association of India (VHAI), said.