Hours before the three-day meeting to decide the crucial tax rates, MPs, doctors, tobacco victims and public health advocates have appealed to the GST Council to tax tobacco uniformly at the highest GST rate of 40 per cent to save millions of Indians from dying prematurely of tobacco related diseases.
The GST Council meeting begins on Tuesday, and the members, comprising the union finance minister and finance ministers from all the states, are expected to more or less finalise the tax rates and exemptions in the meeting.
“Government should make tobacco prohibitively expensive in GST era. There is no justification for giving any subsidy to a product that kills every second user prematurely”, Dinesh Trivedi, Trinamool Congress MP and former union minister of state for health and family welfare.
According to Voluntary Health Association of India, each year, almost one million Indians die from tobacco-related diseases. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rs. 1.04 lakh crore ($17 billion) in 2011 which is 1.16 per cent of the GDP. Tobacco-attributable direct medical costs alone are around 21 per cent of national health expenditure. In fact, this is greater than what the Indian government/states stand to gain as excise revenue from tobacco.
Bidis, which comprise 48 per cent of the tobacco market—as compared to chewing tobacco which is 38 per cent and cigarettes 14 per cent—have been subjected to very low central and state taxes under the false pretext of protecting bidi rollers’livelihood.
Even as the industry is opposing the recommendations to impose the ‘sin tax’ rate of 40 per cent on tobacco, it is important to note that tobacco taxation in India is way below global standards. According to Rijo John, assistant professor, IIT Jodhpur, “A recent report from WHO shows that current cigarette taxes as a percentage of retail prices in India are lower than even neighboring countries such as Sri Lanka and Bangladesh and rank 80th in the world. A 40 per cent GST rates plus central excise duty at the current levels would just about maintain the current tax burden on tobacco products. It is also important to allow states to maintain their right to impose top-up taxes on tobacco products in order to actually make tobacco and tobacco products less affordable over time”.
“We strongly support the highest level of tax for bidis under GST and petition that some of these taxes are used to improve our wages/living conditions as well as provide alternative livelihoods”, said Nazim Ansari, secretary, Abul Kalam Azad Jan Sewa Sansthan (representing around 6000 bidi workers in Uttar Pradesh).
Pankaj Chaturvedi of the Tata Memorial Hospital in Mumbai said he saw no logic in giving tax subsidy to bidi (or any tobacco product) in GST. “With current tax pattern on bidi, consumer and the nation are losers whereas a handful of business families (bidi industry owners) are making vulgar profits. Most of the bidi industry families wield great political clout. They violate every law related to minimum wages, child labor, healthy workplace etc. Excise and tax violation remains rampant in this unorganised industry. It is shocking that there is no tax on bidis in many states”.