Analytics Made Easy - StatCounter
GST council meet: Public health groups demand higher cess on tobacco products – GST Station

GST council meet: Public health groups demand higher cess on tobacco products

GST council meet: Public health groups demand higher cess on tobacco products

    NEW DELHI: Public health groups have moved a proposal to members of the GST council for increasing compensation cess on tobacco products and use the collected revenue on schemes such as Ayushman Bharat. The GST council is scheduled to meet on 18th December.

    The groups have urged the GST council to further increase compensation cess on all tobacco products, while retaining tobacco products at the highest demerit goods category at 28% under GST. They have argued that increasing the compensation cess on tobacco products may help the government garner additional revenue of ₹190 billion to make up the deficit short fall in GST collection.

    “Tobacco products at 28% rate and additional compensation cess will not only bring in additional revenue but also reduce tobacco consumption,” the proposal said. “The additional revenues collected will support the deficit shortfall and can also be used to support government schemes like Ayushman Bharat,” Bhavna B Mukhopadhyay, Chief Executive, Voluntary Health Association of India, an NGO working towards health.

    Health economists, public health experts and cancer research experts have called for increasing the compensation cess uniformly on all cigarettes to ₹5,463 per 1000 sticks on cigarettes irrespective of their size.

    “Such increase could potentially increase the GST revenue from cigarettes by about ₹150 billion while targeting a 10% reduction in consumption. Compensation cess on all smokeless tobacco products should also be increased to 125%, on average, from the current 104%. This could potentially increase the GST revenue by about Rs. 3 billion while targeting a 10% reduction in consumption,” the proposal said.

    Considering the extremely low price of bidis costing only about 65 paisa per stick, the compensation cess can be applied on bidis at the rate of 30 paisa per stick which is expected to result in a retail price of minimum Re 1 per stick. This could potentially increase the tax revenue from bidis by about 37 billion while targeting a 52% reduction in consumption, the proposal said.

    Most of the GST compensation cess on cigarettes is specific in nature and had not been revised for the past two years. This has significantly eroded the real value of tax and has made cigarettes, bidis and smokeless tobacco products highly affordable, threatening to undermine the progress in reduction of prevalence of tobacco consumption in India, the experts have argued.

    The present GST rates combined with the compensation cess for all tobacco products is far below the recommended level of tax burden (taxes as a percentage of final tax inclusive of retail price) of 75% by the World Health Organization (WHO). The total effective tax burden currently for tobacco products in India is only about 49% for cigarettes, 22% for bidis and 60% for smokeless tobacco. As the taxes have not been increased on any of the tobacco products for more than two years, all tobacco products have become more affordable during this time. Hence, increasing taxes on tobacco products are warranted not only for regulating its consumption, but also for raising more tax revenue.

    “India has witnessed decline in tobacco prevalence mainly due to the relatively higher taxation. However, it has been nearly two years since the tax on tobacco has changed under the GST, making tobacco products more affordable. It is high time the GST council raises compensation cess on these to sustain the prevalence reduction, as witnessed between the two rounds of global adult tobacco surveys, Rijo John, Economist and Health Policy Analyst said.

    “Concerns of increased illegal cigarette trade on account of tax increase are unsupported by the evidence both from within and outside India. A critical step to check this has been taken by the Government of India by ratification of the WHO protocol to eliminate illicit trade in tobacco products,” John said.

    Tobacco kills more than 1.3 million people each year in the country. India is home to the second greatest number of smokers in the world behind China. Additionally, tens of millions use deadly smokeless tobacco products. Approximately 130 million people of age 15 and older in India currently smoke and roughly half of all adults are exposed to second-hand smoke at home. The total direct and indirect cost of diseases attributable to tobacco use was a staggering ₹1.04 lakh crore ($17 billion) in 2011 or 1.16% of India’s GDP.

    “Government should levy uniform and high taxes on all categories of cigarettes, bidis and smokeless tobacco. It should levy cess on bidis just as it does on other tobacco products. There is ample evidence about bidis being the killer and not the pleasure of the poor. It should be made unaffordable for the poor to save them from a lifetime of misery and suffering”, Harit Chaturvedi, Chairman, Max Institute of Cancer Care.

    Source- Livemint.