Taxes on tobacco products in India are way below the internationally-accepted standards
In the budget tabled on Saturday, Union Finance Minister Arun Jaitley has proposed an increase in excise duty on cigarettes.
The duty will increase by 25 per cent on cigarettes of length not exceeding 65 mm and by 15 per cent for cigarettes of other lengths, cigars, cheroots and cigarillos. The budget has also raised the excise duty on cut tobacco from Rs 60 per kg to Rs 70 per kg.
Increased taxes mean a win-win situation for the country. Not only will it add to the revenue but also reduce consumption of tobacco and thereby the state’s burden of treatment costs. A globally accepted saying is: “triple the taxes, double the revenue, halve the consumption”.
“Increasing excise on cigarettes is a welcome step by the government of India. However, there has been no increase in tax rate on bidis; small bidi manufacturers who produce less than two million bidis in a year are privileged and pay an excise duty much lesser than the amount paid as taxes by those who manufacture less cigarettes,” says Bhavna Mukhopadhyay, executive director, Voluntary Health Association of India.
Minimum tax, maximum burden
The present taxes on tobacco products in India are way below the rate that has been recommended by the World Bank (from 65 per cent to 80 per cent of retail price). Taxes on bidis, on an average, are only 9 per cent of retail price while cigarette taxes account for approximately 38 per cent of the retail price. Tobacco taxes in India are not regularly adjusted with inflation and tobacco products, over the course of time, are becoming increasingly affordable, leading to one million deaths annually in India due to tobacco-related diseases.
According to a recent study, conducted by Public Health Foundation of India and supported by World Health Organization and Union Ministry of Health and Family Welfare, it is estimated that the total economic cost that can be attributed to dealing with diseases that are caused by use of tobacco, in the year 2011, amounted to a staggering Rs 1,04,500 crore—12 per cent more than the combined state and Central government expenditure on health care in the same year.
“Raising tax on cigarettes is welcome and will be helpful to curb consumption. But why bidi remains exempted from any tax hike?” asks Pankaj Chaturvedi, a medical practitioner at Tata Memorial Hospital Mumbai. He further informs that the number of bidi smokers in the country is more than double that of cigarette smokers. The bidi industry kills consumers and exploits the manufacturers or bidi rollers. It is truly sad that the government turns a blind eye to that segment.
“Despite a considerable hike in excise on cigarettes in the budget, India has one of the lowest tax rates in the world. The 15 per cent-raise in cigarettes that measure more than 65 mm is in sync with the inflation and can’t be seen as a bold step by minister.” adds the doctor.
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