Context

Tobacco is a silent killer in our midst that kills an estimated 1.35 million Indians every year.

The harm caused by tobacco

• It is the use of tobacco as a result of which more than 3,500 Indians die every single day, as estimated by scientific studies.
• It also comes at a heavy cost: an annual economic burden of ₹1,77,340 crore to the country or more than 1% of India’s Gross Domestic Product (GDP).

How price and taxation of tobacco matters

•  Research from many countries around the world including India shows that a price increase induces people to quit or reduce tobacco use as well as discourages non-users from getting into the habit of tobacco use.
• There is overwhelming consensus within the research community that taxation is one of the most cost-effective measures to reduce demand for tobacco products.
• There has been no significant tax increase on any tobacco product for four years in a row.
• This is quite unlike the pre-GST years where the Union government and many State governments used to effect regular tax increases on tobacco products.
• As peer-reviewed studies show, the lack of tax increase over these years has made all tobacco products increasingly more affordable.
•  The absence of a tax increase on tobacco has the potential to reverse the reduction in tobacco use prevalence that India saw during the last decade and now push more people into harm’s way.
•  It would also mean foregone tax revenues for the Government.

Way forward

• The Union Budget exercise is not the only opportunity to initiate a tax increase on tobacco products.
• The Goods and Services Tax (GST) Council could well raise either the GST rate or the compensation cess levied on tobacco products especially when the Government is looking to rationalise GST rates and increase them for certain items.
• For example, there is absolutely no public health rationale why a very harmful product such as the bidi does not have a cess levied on it under the GST while all other tobacco products attract a cess.
• GST Council meetings must strive to keep public health ahead of the interests of the tobacco industry and significantly increase either the GST rates or the GST compensation cess rates applied on all tobacco products.

Conclusion

The aim should be to arrest the increasing affordability of tobacco products in India and also rationalise tobacco taxation under the GST.

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