GST regime has ushered in reduced tobacco consumption in Australia

In line with Kerala’s demand for a higher tax burden on tobacco, an analysis of taxation structures in Australia – a world leader in tobacco control – shows that a combination of GST and central specific excise duty has resulted in reduced consumption of tobacco in the country. 

This combination has been a critical reason for Australia’s success at decreasing the prevalence of tobacco use over the past decade. Available data shows that the country has been able to reduce tobacco prevalence by 25 per cent since 2003, to only 15.8 per cent of adults in 2015 – owing to a judicious mix of tobacco control measures including GST and central specific excise and customs duty, adjusted to meet inflation levels.

GST on tobacco came into force in Australia at the rate of 10 per cent on July 1, 2000. The estimated consumption of tobacco products including cigarettes, cigars, and contraband cigarettes fell from 28,607 million in the year 2000-01 to 24,725 million in 2010-11. 

Between 1999 and 2010, there was no increase in either tobacco central specific excise or customs duty on tobacco products apart from adjustments for consumer price index (CPI). The specific central excise on tobacco products was significantly increased in 2010, with further increases in recent years, on top of annual adjustments for inflation. 

Today, the central excise on cigarettes, cigars, and pipe tobacco has more than doubled its value in 2003, and central excise represents as much as 66 per cent of the retail price of economy brands of cigarettes. Combined with the GST, the tax burden on cigarettes is close to World Health Organisation (WHO) standards.

Estimations of revenue from GST also show a more than 56 per cent increase from 783.27 million dollars in 2001 to 1,225.36 million dollars in 2011.Total estimated revenue from excise, customs duties and GST on tobacco products revealed a 50.8 per cent increase during the same period (from 5,797.21 million dollars in 2001 to 8,742.74 in 2011).

The Australian experience demonstrates that the most direct and effective method for reducing tobacco consumption is to increase the price of tobacco products through tax increases. Higher taxes are particularly effective in reducing tobacco use among vulnerable population groups, such as the youth, pregnant women, and low-income smokers.  

The WHO has applauded and acknowledged Australia as a global leader in tobacco control. In 2011, Australia became the first country to pass legislation requiring all tobacco products to be sold in plain packaging. This legislation has brought down tobacco consumption by a staggering 19.6 per cent in just almost three years, per a 2015 news report.