GST impact on cigarettes, bidi, chewing tobacco: How smoking will affect your wallet; find out here

GST impact on cigarettes, bidi, chewing tobacco: The tobacco industry is booming, as is clear if we see the balance sheet of ITC. Many reports have been released by WHO claiming that India is harboring the world’s highest incidence of mouth cancer. We are the second largest consumer of tobacco, having an astonishing 275 million users! But how will GST affect this multi-million dollar industry? In the past decade, excise duty rates have been revised for cigarettes and other tobacco products, but locally-manufactured bidi was exempted. GST tax rate on tobacco and tobacco-related products was declared on 18th May by the GST council. Now let us see the impact of GST rates on the tobacco industry in India.

Impact of GST Rate on the Tobacco Industry

Excise duty is charged on the manufacturing of cigarettes, bidi, and other chewing tobacco products at different rates.

Cigarette – 64%

Bidi – 22%

Chewing products – 81%

A lot of revenue is generated from the sale of tobacco for the Indian government, although the tax burden levied on the Indian tobacco industry is not enough, as per the recommendation of WHO, for a tax burden of 75% on all tobacco-related products. There has been an increasing demand for a higher tax burden on the tobacco manufacturers.

Under GST, there will be an additional cess charged on the tobacco-related products, over and above the GST charged at the rate of 28%.

Let’s Understand the Pricing of 1 Cigarette Under GST With an Example

ITC manufactures cigarette, chewing tobacco, and pan masala.

Particulars	Cigarettes under 65mm	Cigarettes between 65mm to 70mm	Cigarettes between 70mm and 75mm	Cigarettes above 75mm	Pan masala	Pan masala with gutkha (tobacco)
Value per unit (A)	Rs 5	Rs 10	Rs 15	Rs 15	Rs 5	Rs 10
Probable maximum cess of the value of goods or transactions. (B)	Rs 0.25 (5%)	Rs 0.50 (5%)	Rs 0.75 (5%)	Rs 0.75 (5%)	Rs 3 (60%)	Rs 20.40
Probable cess per 1000 sticks (C)	Rs 1.591	Rs 2.876 (non-filter) and Rs 2.126 (filter)	Rs 2.876 (both filter and non-filter)	Rs 4.170 (both filter and non- filter)	Not applicable	Not applicable
GST rate @28% (D)	Rs 1.40	Rs 2.80	Rs 4.20	Rs 4.20	Rs 1.40	Rs 2.80
Probable price that can be charged on products (A + B+C+D)	Rs 8.016	Rs 16.176 (non-filter) Rs 15.426(filter)	Rs 21.502 (both filter and non-filter)	Rs 24.12	Rs 9.40	Rs 33.20

Cigars and cigarillos will be charged at the rate of 28% and an additional cess up to 21% or Rs 4.170 per stick would be levied. Chewing tobacco has also been kept under the 28% category and an additional cess of 142% would be levied upon chewing tobacco (with lime tube) and 160% on chewing tobacco (without lime tube).

Conclusion

Impact on the tobacco industry is going to be largely neutral since the 5% cess declared by the Indian government was less than the expected rate by the tobacco industry. There will be an increase in the expense of smokers due to the rise in the price of cigarettes in the initial period, although it is expected that irrespective of the tax rate, there will be neutral impact on the tobacco industry due to the implementation of GST.

Source: Financial Express

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India slashes tobacco consumption in a major public health win

India recently reported a sharp decrease in tobacco consumption, a major public health victory. According to the Global Adult Tobacco Survey (GATS) India 2016-17, 81 lakh fewer Indians now use tobacco compared to 2009-10. This represents a 17 percent relative reduction in tobacco consumption across all age groups and a 60 percent relative dip in tobacco use among minors (aged 15-17). The age of initiation for both smokeless and smoking tobacco in the country has also increased by a year. The decrease is important because tobacco is the leading contributor to heart disease, cancers, chronic respiratory diseases and diabetes, which are responsible for 43 percent of all deaths in India. India’s tobacco control policies, which have focused on prevention and decreasing initiation, appear to be working.

Major tobacco control measures

Over the past several years, India has taken a series of measures to control the tobacco-related epidemic. In 2011, gutka, a form of chewable tobacco that is one the biggest cause of oral cancers, was banned by the Government of India and subsequently by various states. The ban was ambitious and faced a severe backlash from the influential gutka industry in the country.

The results are impressive. Smokeless tobacco use has dropped from 25.9 percent in 2010 to 21.4 percent in 2017. The impact on oral cancer, a leading cause of cancer in India is expected to be profound but it is too early to tell.

India’s second big win came in the face of combined resistance from the smoking and smokeless tobacco industry: increasing the size of pictorial health warnings on tobacco products. In the face of industry pressure for less graphic warnings, India signed on for warnings that cover 85 per cent of packaging on all tobacco products in 2015. These efforts appear to be working. According the latest evidence, more than 60 percent of cigarette smokers, 53 percent of bidi smokers, and 46 percent of smokeless tobacco users attribute their desire to quit tobacco to pictorial warnings.

The third important measure was the increased taxation (in the form of value added tax or VAT) on tobacco products across states over the last six years. Almost two-thirds of tobacco users in India smoke bidis, which was taxed at a rate between 12 per cent to 65 percent depending on the state. The central government has proposed to tax all tobacco products at the highest bracket of 28 percent under the new Goods and Services Tax (GST).

Road ahead

Tobacco-related diseases cost the country more than one lakh crores a year (2011 estimates) and more needs to be done to improve on India’s performance over the last decade. The implementation of the Cigarettes and Other Tobacco Products Act (COTPA), which restricts the sale of tobacco to minors, point-of-sale advertising, surrogate advertising should be strengthened. 

India should also curb the other variants of smokeless tobacco such as khaini and paan masala, which have been banned in some states. Implementation of the ban on smoking in public places must also be enforced, as evidence shows minimal change in second hand smoke exposure at workplaces.

Cessation services should be made more widely available. Despite the National Tobacco Control Program being enumerated in the last two five-year plans, little progress has been made. Latest evidence shows that thanks to various awareness measures taken by the government, about half of all smokers and smokeless tobacco users now have the desire to quit tobacco use (an increase of approx. 9 percent and 4 percent, respectively, since 2010). This demand needs to be met with counselling and pharmacotherapy services. Without effective and operational cessation services made available down to the sub-district level, the gains cannot be sustained. Funding, capacity building and integrated health services are the need of the hour.

The question of alternative livelihoods for tobacco farmers and bidi rollers in the country also needs to be addressed. The Indian Tobacco Board had for many years, rolled out subsidies and incentives that encourage tobacco cultivation in the country, conflicting with India’s obligations under the WHO Framework Convention for Tobacco Control (FCTC). Despite growing evidence of the demand for viable alternatives, efforts in the direction have been countered by the tobacco industry, with a pretext of saving livelihoods. Efforts are now being made to phase out the current subsidies and support farmers for growing alternative crops.

The COTPA should also be made more progressive, for example, to increase the legal smoking age to 21 years from 18 years, as has been done for alcohol consumption in many states.

Tobacco control involves multi-sectoral commitment and action and is therefore a challenge for developing countries to implement. There are few investments that India could make that match the returns on tobacco control. Millions of lives are at stake.

Source: ETHealthworld

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Govt pulls up airport tobacco stores

Noting a violation of anti-smoking laws at airports, the Ministry of Health and Family Welfare has written to the Ministry of Civil Aviation, Airport Authority of India (AAI) and major airports in the country to ensure adherence to the rules.

The Ministry has written to the Chairman of AAI and CEO of Chhatrapati Shivaji International Airport, Mumbai, Indira Gandhi International Airport, New Delhi and Rajiv Gandhi International Airport, Hyderabad that they should take appropriate steps to discourage smoking as it impacts human health as well as economy of the country.

“It has been observed that under the provisions of the Cigarettes and other Tobacco Products (Prohibition of Advertisement (COTPA, 2003) and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003, the enabling rules are being violated at the airports, by shops selling cigarettes and other tobacco products. These shops, in contravention of the provisions of COTPA, display tobacco advertisements and are located just outside the smoking room or in food courts, thus facilitating tobacco use and also enticing non-smokers, especially children to these shops and to the smoking room,” stated Arun Kumar Jha, Economic Adviser, Union Health Ministry in his letter dated 26 May, 2017.

“In certain airports, tobacco products are also sold from shops selling souvenirs, food articles, books, and comics, etc. These shops also do not display the following signage: ‘Sale of tobacco products to a person below the age of eighteen years is a punishable offence’,” the letter said.

Recently, the Union Health Ministry issued a notification banning the use of hookah service in any smoking area or space provided for smoking and also directed that the owner, proprietor, manager, supervisor or in charge of the affairs of the hotel restaurant or airport, must display a board at the entrance of the smoking area or spaces of minimum size of 60x30 cm with a white background and having the message in English and one Indian language as applicable in black colour: “Tobacco smoking is harmful to your health and the health of non-smokers” and “Entry of person below the age of eighteen years is prohibited”

Tobacco related diseases kill about 2,500 Indians daily and over 10 lakh every year. It is estimated that about 5,500 youth and children (as young as 8 years old), start tobacco use daily.

Law violation

Airport shops in contravention legal provisions display tobacco advertisements and are located just outside the smoking room or in food courts

The practice is facilitating tobacco use and also enticing non-smokers ‘especially children’ to these shops and to the smoking room.

Source: DNA

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