Central Idea

Public health researchers recommend a health tax of 20% to 30% on sugar, sugar-sweetened beverages (SSBs), and high-fat, salt, and sugar (HFSS) products, in addition to the existing GST.
The recommendation stems from a UNICEF-funded project, aiming to influence policies to reduce sugar consumption.

Study Insights and Recommendations

Targeting Bulk Consumers: The study suggests taxing bulk consumers like confectionery manufacturers, rather than household sugar purchases.
Definition of Sugar: The study includes all forms of refined, unrefined sugar, and gur (brown cane sugar) used by manufacturers.
Impact on Manufacturers: Manufacturers, who buy up to 55% of India’s annual sugar production, are expected to be more price-sensitive than households.

Niti Aayog’s Interest: Niti Aayog is exploring the impact of health taxes and warning labels on food products to promote healthy eating in India.
Current and Proposed Tax Rates: Sugar is currently taxed at 18% GST. The proposed additional tax could raise the total tax to 38-48%.
Price Elasticity Metric: The study uses ‘Price Elasticity’ to estimate demand reduction. A 10% price increase could lead to a 2% demand reduction for households and a 13-18% reduction for manufacturers.
Health Tax on Beverages and HFSS Products: A 10-30% health tax on SSBs could decrease demand by 7-30%, while a similar tax on HFSS products might lead to a 5-24% decline.

Increase in Tax Revenues: Additional taxes could boost government revenues by 12-200% across different scenarios.
Current Tax Rates on Products: Sugar attracts 18% GST, SSBs 28% GST plus 12% cess, and HFSS products 12% GST.
Public Health Benefits: Higher taxes on unhealthy foods could reduce obesity, diabetes, cardiovascular diseases, and certain cancers.

India’s Sugar Intake: India is the world’s largest sugar consumer, with an average consumption of 25 kg per person per year, exceeding WHO recommendations.
Rise in Sugar-Related Health Issues: There has been a significant increase in the sale of aerated drinks and HFSS food products, contributing to obesity and diabetes.

Encouraging Product Reformulation: The proposed tax rate is linked to sugar volume, encouraging manufacturers to reduce sugar content in products.
Taxing Sugar Replacements: The study also recommends taxing artificial sweeteners to prevent manufacturers from switching to cheaper, unhealthy alternatives.

Health Tax Implementation Worldwide: Over 70 countries, including Mexico, Chile, and South Africa, have implemented health taxes on sugar and related products.
Positive Outcomes in Mexico: In Mexico, the taxation on SSBs led to decreased consumption of taxed beverages and a reduction in mean BMI among younger age groups.

Potential for Health Improvement: Imposing a health tax on sugar and related products could significantly contribute to public health improvement in India.
Consideration of Economic Factors: The success of such a policy will depend on balancing health benefits with economic impacts on consumers and manufacturers.