PANJIM: Public health groups along with doctors and economists are urging the GST Council to increase compensation cess on all tobacco products that can provide additional tax revenue of Rs. 49,740 crores.
“This additional revenue could significantly contribute to the increased need for compensation by different states during the pandemic and to disburse the dues already owed by the Centre,” NOTE Goa secretary Dr Shekhar Salkar said.
He pointed out that the GST revenue receipts of both central and states governments have been severely affected due to the COVID-19 pandemic and, as a result, the central government has not been able to distribute the compensation cess dues to different state governments as guaranteed under the GST.
Salkar said that applying compensation cess on bidis and raising the existing compensation cess on cigarettes and smokeless tobacco products can be a very effective policy measures to address the immediate need to raise the compensation cess revenue by the central government.
Proposed Compensation Cess on tobacco products and its Impact
Bidis
Cigarettes
Smokeless tobacco
Proposed compensation cess
Rs. 1 per stick
Rs. 5 per stick
52%
Estimated additional cess revenue (Rs.)
233 billion
250 billion
13.5 billion
New total tax burden
67%
65%
70%
Estimated percentage decline in consumption
35%
17%
10%
Estimated percentage decline in prevalence
18%
10%
5%
Estimated decline in attributable deaths
9.1 million
3.4 million
7.2 million
“Increasing compensation cess on all tobacco products, including bidis, is a winning proposition for Government as it will provide the much needed additional tax revenue for COVID 19 stimulus package for providing relief to the people of the country while motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use” – Ashim Sanyal, COO, Consumer VOICE
Increasing taxes on all tobacco products will not only reduce their affordability and therefore consumption, but also to limit the increasing health and fatal damages caused by tobacco. Tobacco smoking is a known risk factor for many respiratory infections and increases the severity of respiratory diseases. Early evidence from China and Italy has found that patients with underlying health conditions and risk factors, including smoking and diseases linked to smoking, may be at greater risk for severe outcomes or death from COVID-19.
The WHO recommends total taxes to represent at least 75% of the retail price for all tobacco products. Currently, the total tax burden (tax expressed as a percentage of final retail price) is only 49.5% for cigarettes, and 63.7% for smokeless tobacco in India, well below the minimum recommended by the WHO. Bidis, on the other hand, enjoy an extremely low tax burden of only 22% despite being at least as harmful as cigarettes, and are smoked by almost twice as many Indians as cigarettes, resulting in an estimated annual economic costs from diseases and deaths to the tune of Rs. 805.5 billion, or 0.5% of India’s GDP. Although there has been a small increase of National Calamity Contingent Duty (NCCD) on cigarettes and smokeless tobacco in the Union Budget 2020-21, all tobacco products have become more affordable over the past three years since the GST became effective in 2017.
“There is ample evidence about bidis being the killer and not the pleasure of the poor. These should be made unaffordable for the poor to save them from a lifetime of misery and suffering,” Dr Salkar said.
India has the second largest number of tobacco users (268 million or 28.6% of all adults in India) in the world – of these at least 12 lakh die every year from tobacco related diseases. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04,500 crores in 2011 or 1.16% of India’s GDP.
