GST meet: Health bodies ask for Higher Tobacco Taxes

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Srinagar: As the GST Council is all set to meet in Srinagar for its last meeting tomorrow, various health bodies have demanded for fixation of higher taxes on all tobacco products.

Pertinently, the Council’s decision at tomorrow’s meeting will have a long lasting impact on the lives of India’s 275 million tobacco users.  

Practically all major countries in the world subject tobacco products to high rates of consumption taxes with the objective of discouraging its use among the poor and youth and to garner additional revenue.

Currently 35% of all adults in India use some form of tobacco leading to at least 1 million deaths from tobacco related diseases each year. There is an overarching consensus that goods that are harmful to society such as tobacco be categorized as “sin” and should be taxed at the highest rate on account of their serious adverse impact on public health. 

“It is imperative that Bidis which are the most commonly used tobacco product in India, accounting for 64% of all tobacco consumption and disproportionately used by the poor should be put in the demerit/sin rate category under the GST regime to avert a public health disaster,” health bodies have suggested. 

Pertinently, with the total tax burden currently at 53%, 19.5% and 56% respectively for cigarettes, bidis and smokeless, tobacco taxation in India is much lower than the level recommended by the WHO, according to which the tax burden should represent at least 75% of the retail price.

“All tobacco products should be subjected to the highest level of tax under GST (28% + cess) with no segmentation. Classifying different tobacco products like bidis in lower rate GST slabs will be a distortion and will send a wrong message and promote the use of products like bidis,” the WHO has claimed.

Pertinently, taxation is clearly the best way to tackle the tobacco threat as reiterated by research all over the world including India. It is critical that the total tax burden on tobacco under the GST regime does not fall below the current tax burden in order to achieve revenue neutrality and maintain the current progress on public health. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04 lakh crore ($17 billion) in 2011 or 1.16% of India’s GDP.

In Jammu & Kashmir itself, 26.6% population of people is using tobacco product in one or the other of its form. J&K has 12% cigarette smokers, 3.8% bidi smokers and 8.0% smokeless tobacco users.

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