Appeal to GST Council for highest tobacco tax

Concerned by 2015 World Health Organisation (WHO) Global Tobacco Epidemic report that finds India to be among the very few countries where cigarettes have become more affordable over the past years, Tobacco Free Kerala, along with other tobacco control groups in the country have appealed for the highest tax on tobacco to the GST Council.

The appeal is for the highest possible tax rate under GST on all types of tobacco including cigarettes, bidis, smokeless tobacco, and pan masala in order to discourage their consumption and addiction amongst Indians and safeguard public health. 

This is in the light of the WHO’s articulation that the most direct and effective method for reducing tobacco consumption is to increase their price through tax increases. Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, and low-income smokers. An increase in tobacco prices by 10 per cent decreases tobacco consumption by 4 percent 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 in the world with 275 million or 35% of all adults in India. Each year, about 1 million Indians die from tobacco-related diseases and if current trends continue, tobacco will account for 13% of all deaths in India by 2020. Tobacco-use imposes enormous health and economic burden on the country as tobacco-attributable direct medical costs alone are around 21% of national health expenditure. 

According to Dr. Rijo John of 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. GST at 40% coupled with central excise duty at the current levels 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 and tobacco products less affordable over time.”

Tobacco taxation in India is way below global standards. The current rates for cigarettes and smokeless is significantly less than that recommended by the World Bank’s 2/3rd (tax should be 67% of retail product price) and the WHO (tobacco excise taxes should account for at least 70% of the retail price).   

The current taxation system differentiates between various forms of tobacco products (such as bidis, smokeless tobacco and cigarettes) while imposing taxes.

Bidis, which comprise 48 percent of the tobacco market - as compared to chewing tobacco, which is 38 percent and cigarettes 14 percent - have been subjected to very low central and state taxes under the false pretext of protecting bidi rollers’ livelihood. 

Shri Nazim Ansari, Secretary Abul Kalam Azad Jan Sewa Sansthan, a representative of around 6,000 bidi workers in Uttar Pradesh said, “We strongly support the highest level of tax for bidis under GST and petition that some of these bidis taxes are used to improve our wages/living conditions as well as provide alternative livelihoods”. 

Shri Ashim Sanyal, Chief Operating Officer, Consumer Voice, a voluntary consumer organisation said, “The GST regime should ideally act as a deterrent to the consumption of health hazard causing substances such as cigarettes and bidis  through higher taxes under GST without any differentiations in the interest of vulnerable sections.”