It is well known that tobacco and tobacco products are globally recognized as “sin goods” on account of their serious adverse impact on public health. Practically all major countries in the world subject tobacco products to high rates of consumption taxes with a view to garner additional revenue on one hand and discourage its use on the other. Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, low-income smokers and chewing tobacco users.
MPs, Doctors, Victims of Tobacco Use and Public Health Advocates have appealed to the GST council to recommend and accept a high tax rate of 40 percent under GST on all types of tobacco products including cigarettes, bidis and chewing tobacco to discourage their use and addiction amongst Indians.
A comprehensive economic reform like GST offers the government a unique opportunity to tax tobacco uniformly at the highest GST rate of 40% to and save millions of Indians from dying prematurely of tobacco related diseases.
“Government should make tobacco prohibitively expensive in GST era. There is no justification for giving any subsidy to a product that kills every second user prematurely”, Dinesh Trivedi, MP, Trinamool Congress and Former Union Minister of State for Health and Family Welfare.
Ashwini Kumar Chaube. Ex Health Minister of Bihar and MP, Bharatiya Janta Party – “As a Health Minister of Bihar I had banned gutka and raised taxes on tobacco products including bidi. I am sure GST council will put tobacco in highest tax category. It will save millions of lives”.
Tobacco-use imposes enormous health and economic burden on the country. Each year, almost 1 million Indians die from tobacco-related diseases in India. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04 lakh crore ($17 billion) in 2011 or 1.16% of GDP. Tobacco-attributable direct medical costs alone are around 21% of national health expenditure. Indeed the costs of tobacco are far greater than what the Indian government/states gain in tobacco excise revenue (just 17% of total health cost).
Even as the industry is opposing the recommendations to impose the ‘sin tax’ rate of 40 percent on tobacco, it is important to note that tobacco taxation in India is way below global standards. According to Dr. Rijo John, Assistant Professor, IIT Jodhpur, “A recent report from WHO shows that current cigarette taxes as a percentage of retail prices in India are lower than even neighboring countries such as Sri Lanka and Bangladesh and rank 80th in the world. A 40% GST rates + central excise duty at the current levels would just about maintain the current tax burden on tobacco products. It is also important to allow states to maintain their right to impose top-up taxes on tobacco products, in order to actually make tobacco and tobacco products less affordable over time.”
“I see no logic in giving tax subsidy to bidi (or any tobacco product) in GST. With current tax pattern on bidi, consumer and the nation are losers whereas handful of business families (bidi industry owners) are making vulgar profits. Most of the Bidi Industry families wield great political clout. They violate every law related to minimum wages, child labor, healthy workplace etc. Excise and Tax violation remains rampant in this unorganized industry. It is shocking that there is no tax on Bidis in many states. All tobacco products should be taxed very high in GST era”, Dr. Pankaj Chaturvedi, Oncologist, Tata Memorial Hospital, Mumbai.
According to, Bhavna Mukhopadhyay, CEO, Voluntary Health Association of India (VHAI) “The GST regime should ideally act as a deterrent to the consumption of health hazard causing substances such as Cigarettes, Bidis etc. through higher taxes. All differentiations should be done away with regards to tobacco and tobacco products and taxed at the highest slab under GST, since lower GST rates would contribute to their affordability and end up promoting their increased consumption amongst most vulnerable sections of population pushing them below the poverty line.”
Bidis which comprise 48 percent of the tobacco market, (as compared to chewing tobacco which is 38 percent and cigarettes 14 percent) have been subjected to very low central and state taxes under the false pretext of protecting bidi rollers’ livelihood. However, the reality is that low taxes and exemptions only benefit the bidi industry owners. “We strongly support the highest level of tax for bidis under GST and petition that some of these bids taxes are used to improve our wages/living conditions as well as provide alternative livelihoods”, says, Nazim Ansari, Secretary Abul Kalam Azad Jan Sewa Sansthan (representing around 6000 bidi workers in Uttar Pradesh).
Public Health fraternity emphasized how critical it is to effectively regulate and tax all forms of tobacco uniformly under GST regime to protect India’s most vulnerable populations – the time has come for the government to step up to protect India’s 67.5 million bidi smokers from an untimely and painful death. A healthy and productive citizen will contribute more to nation building and help in realizing India’s dream of becoming a world economic power.