Health bodies demand 28 per cent tax under GST on tobacco products

As the 14th meet of GST Council is meeting here tomorrow, various health bodies have demanded fixation of 28 per cent taxes on all tobacco products, including bidis in the country.

The health bodies have demanded for fixation of higher taxes on all tobacco products, a spokesman for the Jammu and Kashmir Voluntary Health and Development Association (VH&DA) said here today, adding that the Council's decision will have a long lasting impact on the lives of India's 275 million tobacco users.

He said all major countries in the world subject tobacco products to high rates of consumption taxes with the objective of discouraging its use among the poor and youth and to garner additional revenue.

Currently 35 per cent of all adults in India use some form of tobacco leading to at least one million deaths from tobacco-related diseases each year. There is an overarching consensus that goods that are harmful to society such as tobacco be categorized as "sin" and should be taxed at the highest rate on account of their serious adverse impact on public health, he said.

The spokesman said it is imperative that bidis which are the most commonly used tobacco product in India, accounting for 64 per cent of all tobacco consumption and disproportionately used by the poor should be put in the demerit/sin rate category under the GST regime to avert a public health disaster.

He said according to Dr Rijo John, Economist and Health Policy analyst, "Not including bidis in the same rate band of 28 per cent for demerit goods under GST will be highly detrimental to public health and will continue to keep the poor bidi smokers in a vulnerable position of increased ill health and poverty.

The GST Council should tax all forms of tobacco including bidis at 28 per cent under GST regime, to send the right public health message that all tobacco products are demerit products and their consumption should be discouraged through higher taxation in the interest of public health.

He said 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 (WHO), according to which the tax burden should represent at least 75 per cent of the retail price.

"All tobacco products should be subjected to the highest level of tax under GST 28 per cent + cess with no segmentation. Classifying different tobacco products like bidis in lower rate GST slabs will be a distortion and will send a wrong message and promote the use of products like bidis," the WHO has claimed, according to the spokesman.

He said taxation is clearly the best way to tackle the tobacco threat as reiterated by research all over the world including India. It is critical that the total tax burden on tobacco under the GST regime does not fall below the current tax burden in order to achieve revenue neutrality and maintain the current progress on public health. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04 lakh crore (17 billion dollars) in 2011 or 1.16 per cent of India's GDP.

He said in Jammu & Kashmir itself, 26.6 per cent population of people is using tobacco product in one or the other of its form. J&K has 12 per cent cigarette smokers, 3.8 per cent bidi smokers and 8 per cent smokeless tobacco users.

"India cannot move forward on its poverty alleviation and development agenda without addressing the health concerns and untimely death of 67.5 million bidi users.

He said it is critical that the proposed GST structure must treat bidis at par with all other tobacco products. Categorising bidis in the demerit goods category and subjecting it to the highest levels of taxation under GST may be one of the most critical public health and revenue decisions that the GST council can take, which will impact the health and well-being of Indians," the health bodies said.