A Sin tax rate below 40% would certainly make all tobacco products even more affordable to youth and other vulnerable populations.
BENGALURU, November 1st, 2016: India has the second largest number of tobacco users (275 million or 35% of all adults in India) in the world – of these at least 10 lakh die every year from tobacco related diseases. Tobacco-use imposes enormous health and economic costs on the country.
There is certainly an overarching consensus that goods that are harmful to society categorized as “sin” such as tobacco be taxed at the highest rate under GST as recommended in the Chief Economic Advisor report which seeks a 40% GST sin rate on all tobacco products including cigarettes, bidis and chewing tobacco. The GST council meeting that concluded on October 20th proposed a much lower 26% GST sin rate which would have significant impact on the revenue as well as the health of our nation, both of which require serious consideration. The rationale for a sin tax is twofold, to pay for the damage caused to society by products like tobacco, and secondly, to increase the price and reduce their usage. A 26% rate would defeat both purposes – it would significantly reduce current revenues from tobacco and would actually make tobacco products more affordable and encourage consumption, especially among vulnerable population including children and youth.
Tobacco-use imposes enormous health and economic costs on the country. 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 India’s GDP.
“A much lower GST rate would make all tobacco products even more affordable to youth and other vulnerable populations, leading to the impact of the tobacco epidemic becoming more severe driving up health care costs and resulting in productivity losses. This will certainly lead to an increased number of fatalities per year, which is not a good news for any country. I firmly believe & urge that the government should tax the tobacco products at very high rate to ensure it discourages mass consumption” Dr. U. S. Vishal Rao, Oncologist and Member of High Power committee for tobacco control, Government of Karnataka.
Approximately 48 percent of men and 20 percent of women consume tobacco (35 percent of the adult population overall) - of these at least 10 lakh are dying each year from tobacco related diseases. Bidis comprise 48 percent of the tobacco market, chewing tobacco 38 percent and cigarettes 14 percent so it is evident that bidis account for a significant portion of those deaths.
According to, Dr. Upendra Bhojani, Assistant Director, Institute of Public Health(IPH) “The current tobacco tax differentiates significantly between various forms of tobacco products (such as bidis, smokeless tobacco and cigarettes). Continuing to sell cheap, virtually tax-exempt bidis to the underprivileged, even in the new GST system, will ensure that the poor continue to be trapped in vicious cycle of poverty and ill health, exacerbated by affordability and addiction which causes them to spend more on tobacco and less on food, healthcare and education. We would urge the central and state governments to tax all forms of tobacco including bidis at 40 percent under GST regime, to insulate the population from its ill effects.”
Durgaiah, a farmer from kanakapura taluk of Ramanagar district said that he smoked beedis for 30 years and eventually was admitted to hospital for breathlessness due to throat cancer and later on lost his voice box which was surgically removed. He wondered why was the Government making beedis so affordable and cheap if they had bad consequences, especially if the government was so concerned about the poor. He emphasized that government should make beedies costlier than cigarettes and should be beyond the reach of a poor man in a village.
Based on current scenarios under consideration, a 40% Sin rate combined with the existing excise tax and top-up state rights to tax tobacco appears to be the best scenario for public health and revenue. This will not only help us maintain the current tax burden on tobacco, and will prevent more Indians from falling prey to life-threatening diseases and caught in a cycle of perpetual poverty!