Government wants 28 per cent tax on all tobacco products

In a move aimed at lowering consumption of tobacco products, the health ministry has sought to tax all such products, including bidis, at 28 per cent as well as impose higher cess under the new GST regime.

Greeting the step taken by finance ministry to keep aerated drinks, tobacco products, luxury cars and pan masala in the 'demerit goods' category, the health ministry suggested that the cess levied under the GST should be high enough to make these products unaffordable over a period of time.

In an office memorandum issued by the health ministry recently, it suggested that exemptions from the high taxation norms should not be extended to industries with low turnover such as bidi manufacturers as this will allow them to manipulate norms.

"Taking advantage of this exemption, bidi manufacturers closed bigger units and started producing on small scale under different names in a clandestine manner, resulting in huge tax evasions," the memorandum said.

The ministry, which has favoured higher taxes on all tobacco products for long, also highlighted that tiered tax structure for cigarettes needs to be done away with as these slabs are open to manipulation for products substitution and promotion.

Last year in February, health minister J P Nadda had also written to finance minister Arun Jaitley pressing the need to impose a sin tax or a health cess on demerit goods such as tobacco products and aerated drinks.

Nadda had also suggested considering a proposal to earmark the proceeds from the additional surcharge to fund health schemes like the Rashtriya Swasthya Bima Yojna. Tobacco consumption is one of the leading causes for non communicable diseases including different types of cancer, heart disorders and respiratory diseases.

The rising burden of non­-communicable diseases not only undermines India's socio-economic development at macro level but also has huge impact at household, family and individual level. 

As per government estimates, merely the health cost on account of tobacco consumption is pegged at over Rs 10,40,500 crore in 2011 for people aged between 35 to 69 years. Each year, about 10 lakh Indians die from tobacco­related diseases.

Experts say globally there is ample evidence to show that tobacco tax increases are the most effective policy to reduce tobacco use.

Source: Economic Times