Tax hiked on tobacco products for human and fiscal health

Economic cost of diseases caused by tobacco is 12 per cent more than the money spent by Centre and state together on healthcare in India, says a study

By Kundan Pandey
Published: Thursday 10 July 2014

Activists are unhappy that tax on bidis has not been hiked

Accepting the recommendations made by the Ministry of Health and Family Welfare (MoHFW), finance Minister Arun Jaitley, on Thursday, increased the excise duty on cigarettes, pan masala and other tobacco products.

Jaitley proposed to increase the specific excise duty on cigarettes in the range of 11 to 72 per cent. Similar increases were proposed on cigars, cheroots and cigarillos. The excise duty will be increased from 12 per cent to 16 per cent on pan masala, from 50 per cent to 55 per cent on unmanufactured tobacco and from 60 per cent to 70 per cent on gutkha and chewing tobacco.
The finance minister, in his budget speech, said, “These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health.” He also proposed to levy an additional duty of excise at 5 per cent on aerated drinks containing added sugar.

In June, Union health minister Harsh Vardhan had written a letter to finance minister Arun Jaitley, suggesting an increase in tax on the retail price of cigarettes from 45 per cent to 60 per cent, as higher tax rate would fetch the government an additional Rs 3,800 crore of revenue.

Welcoming the move, Bhavna Mukhopadhyay, executive director of non-profit Voluntary Health Association of India (VHAI) said, “It is encouraging to see that the finance minister has come forward to show tremendous commitment towards safeguarding the health of people of India” The NGO professional added, “Raising taxes on tobacco products is the single most effective way to reduce tobacco use and save lives. In India, taxes on tobacco are lower as compared to those countries which have effective tobacco control policies. This makes tobacco products easily affordable in India.”

A recent study that was released by Public Health Foundation of India, in collaboration with health ministry and the World Health Organization (WHO), had estimated direct and indirect costs from all diseases caused due to tobacco use, including respiratory diseases, tuberculosis, cardiovascular diseases and cancers. The study estimated that the total economic costs that can be attributed to such diseases in India, in the year 2011, amounted to a staggering Rs 104,500 crores—12 per cent more than the combined expenditure of state and Centre on health care in the same year.

Why spare bidis?

The experts, however, were disappointed that bidis were exempted from additional tax.
“I see no logic in giving tax subsidy to bidi in this budget. With current tax pattern on the product, consumer and the nation are losers as only some companies and industry owners are making profits. Most of these violate every law related to minimum wages, child labour or healthy workplace and wield political clout to flourish,” said Pankaj Chaturvedi of Tata Memorial Hospital. The expert added that since excise and tax violation remained rampant in the unorganised industry, it was shocking that there was no tax hike on bidis.”


Key Features of Budget 2014-2015

WHO report on the global tobacco epidemic, 2013

Tobacco Control Policy Evaluation (TCP) India national report: findings from the wave 1 survey (2010-2011)

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