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Rediff.com  » Business » GST: Health groups seek highest possible tax levy on tobacco items

GST: Health groups seek highest possible tax levy on tobacco items

February 16, 2017 21:24 IST

With the total tax burden currently at 53 per cent, 19.5 per cent and 56 per cent, respectively for cigarettes, bidis and smokeless, tobacco taxation in India is much lower than the level recommended by the World Health Organisation.

Ahead of a crucial GST Council meet on February 18, many public health groups have reached out to Union Finance Minister Arun Jaitley, urging him to ensure that all tobacco products especially bidis are placed in the demerit goods category at the 28 per cent GST rate.

Besides, they have also sought an additional levy of the highest possible rate of cess on such tobacco products.

These groups have also strongly recommended that tobacco products including bidis should be taxed at uniformly high rates under the new indirect tax framework expected to kick in from July 1 this year.

The delegation from Voice of Tobacco Victims (VOTV) has recently sent a memorandum to Jaitley and met the finance ministers of at least 20 states of the country.

The move is significant as it comes just days ahead of the GST council meet which is expected to discuss the rate slabs for different goods and services under the GST mechanism.

With the total tax burden currently at 53 per cent, 19.5 per cent and 56 per cent, respectively for cigarettes, bidis and smokeless, tobacco taxation in India is much lower than the level recommended by the World Health Organisation, according to which the tax burden should represent at least 75 per cent of the retail price.

These groups also expressed disappointment that the Union Budget 2017-18 did not address this anomaly with an effective tax increase of 6 per cent, lower than at least the 10 per cent increase witnessed in previous budgets.

With 10 lakh tobacco triggered deaths every year, public health advocates believe that the government's taxation policies in the tobacco sector have left public health concerns unaddressed.

Classifying different tobacco products in lower rate GST slabs will be a distortion and will send a wrong message and promote the use of products like bidis, said Ashima Sarin, director, Voice of Tobacco Victims (VOTV), adding bidis are the most commonly used tobacco product in India, accounting for 64 per cent of all tobacco consumption and are disproportionately consumed by the poor.

Bidis contribute to the majority of the 10 lakh deaths attributable to tobacco as well as the staggering economic burden caused by tobacco use, she said.

The excise increase proposed on tobacco products in the recent Union Budget of 2017-18 fell far short of even previous budgets, since the proposed increase in Additional Duties of Excise and Basic Excise duties (BED) on various tobacco products amounted to an increase of only 6 per cent in the current budget, the groups against tobacco consumption argued.

Photograph: PTI Photo

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