Public health groups and economists are urging the Government to increase excise duty on all tobacco products to generate additional revenue. In their appeals to the Finance Ministry, they are urging to increase excise duty on cigarettes, bidis and smokeless tobacco. According to the group, increasing excise on all tobacco products can be a very effective policy measure to address the immediate need to raise revenue by the central government. It will be a winning proposition for generating revenue and reducing tobacco use and related diseases as well as COVID related co morbidities.
The tax revenue from tobacco could significantly contribute to the increased need for resources during the pandemic including vaccinations and augmenting the health infrastructure. Levying excise duty on all tobacco products and retaining these in the highest tax slab in GST, will also ensure tobacco products do not become more affordable. This will provide a solid foundation for reducing tobacco usage among vulnerable populations and have long-lasting impact on the lives of the country’s 268 million tobacco users, deter children and youth from initiating tobacco use.
Increasing Excise Duty on all tobacco products will fetch substantial revenue for central government and make tobacco products less affordable, especially for youngsters. Requesting Finance Minister to augment revenue and reduce health harms which will be appreciated by the citizens said Advocate Ajoy Hazarika, Secretary, Consumers’ Legal Protection Forum, Assam
Ministry of Finance in their reply to a parliamentary question in the ongoing winter session has specified that the central excise and cess (NCCD) collected on tobacco products during the year 2018-19 was 1234 crores, in 2019-20 it was 1610 crores and in 2020-21 it was 4962 crores. The taxes collected from tobacco, similar to taxes collected from other sources together form part of the overall Gross Tax Revenues (GTR) of the Government of India and are used to fund all schemes and programmes of the Government.
The share of central excise duties in the total tobacco taxes has decreased from 54% to 8% for cigarettes, 17% to 1% for bidis, and 59% to 11% for smokeless tobacco products, on average, from 2017 (pre-GST) to 2021 (post-GST). There has not been any major increase in tobacco taxes since the introduction of GST in July 2017 and all tobacco products have become more affordable over the past three years. Several countries in the world have high excise taxes along with GST or sales tax and they are continuously being revised. Yet, the excise duty on tobacco in India continues to remain extremely low.
Tobacco industry in India has been virtually enjoying an extended tax-free season on tobacco products over the past four years since the introduction of the GST as there hasn’t been any major increase in tobacco taxation during this time. This has made many tobacco products more affordable. It could turn out to be highly detrimental to public health and potentially reverse some of the tobacco use prevalence reduction India achieved during 2010 – 2017. The Union budget must take a considerate view of public health and increase tobacco taxes significantly especially on bidis, Dr Rijo John, health economist and adjunct professor, Rajagiri College of Social Sciences, Kochi.
The total tax burden (taxes as a percentage of final tax inclusive retail price) is only about 52.7% for cigarettes, 22% for bidis and 63.8% for smokeless tobacco. This is much lower than the World Health Organization (WHO) recommended tax burden of at least 75% of retail price for all tobacco products. According to the WHO, raising the price of tobacco products through tax increases is the most effective policy to reduce tobacco use. Higher tobacco prices that decrease affordability, encourage quitting among users, prevent initiation among non-users, and reduce the quantity consumed among continuing users.
Tobacco use increases risk for severe COVID-19 infection, complications, and death. Available research suggests that smokers are at greater risk of developing severe disease and dying from COVID-19. Tobacco use which is a slow-moving pandemic itself claims the lives of 13 lakh Indians each year. It is critical than ever before to keep tobacco products out of the hands of vulnerable populations like youth and the underprivileged sections of society.
India has the second largest number (268 million) of tobacco users in the world and of these 13 lakhs die every year from tobacco related diseases. Nearly 27% of all cancers in India are due to tobacco. The annual economic costs from all diseases and deaths attributable to tobacco use is estimated to be Rupees 177,341 crores in 2017-18 amounting to 1% of India’s GDP. This will continue to grow post COVID.