Proposed 26 per
cent sin tax rate on tobacco to negatively impact revenue and public health
Ahead of the crucial meeting of the GST Council on Thursday,
November 3, a cohort of victims, doctors and economists have banded together to
appeal to the Council for the inclusion of all tobacco products in the highest
tax slab.
The proposed ‘sin tax’ rate of 26 per cent would be
detrimental to both public health and the national economy, they argue. The
proposed rates would make tobacco products more affordable, thereby boosting
consumption and leading to an increase in the incidence of grave, even terminal,
conditions, including cardiovascular diseases and cancers. In addition, they
point out that the revenue from tobacco products would be significantly
reduced.
Saju, a tobacco-induced oral cancer victim, says that the
prices of all tobacco products should be kept high to both dissuade current
users and prevent the initiation of new users. “I smoked my first cigarette in
my early 20s. Gradually, I was drawn to smoking and I would smoke three-four
cigarettes in addition to using smokeless tobacco products,” he said.
Tobacco use made Saju an oral cancer patient at the
young age of 30. He was treated with chemotherapy, surgery and radiation at
Vandanam Medical College, Alappuzha, and is on regular follow-ups. The
treatment spread over a year cost around Rs three lakh.
“When I think back, I ask myself why I spent my
hard-earned money on tobacco products. It gave my family and me only suffering
and trauma. No one should have to undergo the pain and stress I suffered,” said
Saju, who is now in his early 30s.
Dr Tiny Nair, Head of the Department of Cardiology,
PRS Hospital, has long campaigned for imposing the highest tax rates on tobacco
products. He said, “Taxing tobacco products is a proven way to reduce
consumption as WHO studies have shown. A lower GST rate can accentuate the
tobacco epidemic, driving up healthcare costs. The GST Council should tax all
smoking and smokeless tobacco products at the highest rate. This way, irreplaceable
lives can be safeguarded from untimely morbidity and mortality.”
According to Dr Rijo John, Assistant Professor, IIT
Jodhpur, “Compared to a GST sin tax
rate of 40 per cent, imposing a 26 per cent sin rate would reduce total tobacco
tax revenue by almost one-fifth (17 per cent, or roughly Rs 10,510 crore) even
if the government retains the current excise on tobacco products post GST.”
“Clearly, a 26 per cent 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 per cent on most tobacco
products,” added Dr John, a reputed researcher on tobacco taxation.
The rationale for a sin tax is two-fold, to pay for the damage caused to
society by products like tobacco and second, to reduce usage by increasing
price. A 40 per cent sin tax rate combined with the existing excise tax and
top-up state taxes on tobacco appears to be the best scenario for public health
and revenue.
