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Rajasthan, Jammu and Kashmir hike VAT on tobacco products

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Date:Mar 7, 2013

Increase in tax in previous years decreased tobacco consumption in Rajasthan

In a bid to deter people from using tobacco products, two states—Rajasthan and Jammu and Kashmir—increased value added tax (VAT) on all tobacco products in their state budget for 2013-14.
Rajasthan increased VAT on all tobacco products from 50 per cent to 65 per cent while Jammu and Kashmir increased it from 30 per cent to 40 per cent.

In Rajasthan, consumption of cigarettes, bidi and zarda (chewing tobacco) has declined drastically since the past three years after the state government increased tax rate on tobacco products from 20 per cent to 50 per cent. While in terms of value, cigarette sale was worth Rs 413.55 crore in 2010-11, it dipped to Rs 349.67 crore in the following year while in the first six months of current financial year the total sale of cigarettes was just Rs 160.28 crore. Similarly, bidi industry registered a decline in sale by more than 50 per cent in the past two years from Rs 73.45 crore to Rs 25.10 crore and chewing tobacco sale dropped from Rs 31.54 crore to Rs 14.56 crore.

J&K bans gutkha
According to the Global Adult Tobacco Survey (GATS) India of 2009-10, released by Ministry of Health and Family Welfare, a total 32.3 per cent population of Rajasthan is using tobacco products in one or the other form. Rajasthan has 2.8 per cent cigarette smokers, 16 per cent bidi smokers and 19 per cent use smokeless tobacco. Similarly, 26.6 per cent population of Jammu and Kashmir is using tobacco products in one or the other form. Jammu and Kashmir has 12 per cent cigarette smokers, 3.8 per cent bidi smokers and 8.0 per cent use smokeless tobacco. Gutkha, meanwhile, was been banned in Jammu and Kashmir on Wednesday.

Executive director of Voluntary Health Association of India (VHAI), Bhavna Mukhopadhyay welcomed the increase on VAT on tobacco products. “Higher tobacco taxes generate higher tax revenues. Countries like South Africa and Thailand that have significantly increased cigarette taxes have got substantial increases in revenue, even while reducing tobacco use. In India, states like Jammu and Kashmir, Himachal Pradesh, Rajasthan, Uttar Pradesh, Tamil Nadu and many more have increased taxes on tobacco products and have reported to have increased revenues following their decision to increase VAT,” she said.

Binoy Mathew who also works with VHAI said the tax increase will further motivate people to distance themselves from tobacco products.

Union Finance Minister P Chidambaram also announced to increase the tax on tobacco products in his budget speech on February 28. In the budget of 2013-14, he announced an 18 per cent increase of excise on cigarettes.

Tobacco use is one of the major causes of death, disease and disability globally. According to the GATS India Report of 2009-10, among the 34.6 per cent current adult (15 plus age group) tobacco users, 25.9 per cent use smokeless tobacco (206 million users). Out of this, 30.7 per cent are rural and 15.0 per cent are urban users. Among the 20.3 per cent of female tobacco users, 18.4 per cent use smokeless forms of tobacco.

 

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