Increase cess on tobacco products, tobacco eradication organisation urges govt

Panaji (Goa) [India], Aug 25 : Public health groups, doctors and economists have urged the GST council to increase the compensation cess on all tobacco products that can provide additional tax revenue of Rs 49,740 crore for the government, the National Organisation for Tobacco Eradication (NOTE-India) said.
"This additional revenue could significantly contribute to the increased need for compensation by different states during the pandemic and to disburse the dues already owed by the centre. They all are appealing to the GST Council to, as an extraordinary measure, to apply the compensation cess on bidis and also increase the existing compensation cess applied on cigarettes and smokeless tobacco products during the upcoming meeting of the GST council," NOTE-India said in a statement.
According to Dr Rijo John, Economist & Health Policy Analyst: "Unprecedented financial resources will be needed for the country to recover from the economic shock COVID-19 has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted, compensation cess on tobacco could be a win-win as it will discourage tobacco consumption while bringing in substantial revenue for the government. A Re 1 compensation cess per stick of bidis and significant cess increases on cigarettes and smokeless tobacco products are expected to generate additional tax revenue to the tune of Rs. 50,000 crore.''
"Increasing compensation cess on all tobacco products, including bidis, is a winning proposition for the government as it will provide the much needed additional tax revenue for a COVID-19 stimulus package for providing relief to the people of the country while motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use," Ashim Sanyal, COO, Consumer VOICE said.
The WHO recommends total taxes to represent at least 75 per cent of the retail price for all tobacco products. Currently, the total tax burden (tax expressed as a percentage of the final retail price) is only 49.5 per cent for cigarettes, and 63.7 per cent for smokeless tobacco in India, well below the minimum recommended by the WHO.
Bidis, on the other hand, enjoy an extremely low tax burden of only 22 per cent despite being at least as harmful as cigarettes and are smoked by almost twice as many Indians as cigarettes, resulting in estimated annual economic costs from diseases and deaths to the tune of Rs 805.5 billion, or 0.5 per cent of India's GDP.
Although there has been a small increase of National Calamity Contingent Duty (NCCD) on cigarettes and smokeless tobacco in the Union Budget 2020-21, all tobacco products have become more affordable over the past three years since the GST became effective in 2017.
"There is ample evidence about bidis being the killer and not the pleasure of the poor. These should be made unaffordable for the poor to save them from a lifetime of misery and suffering," said Dr Shekhar Salkar, renowned Oncologist and General Secretary of NOTE, Goa.
India has the second-largest number of tobacco users (268 million or 28.6 per cent of all adults in India) in the world - of these at least 12 lakh die every year from tobacco-related diseases. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rs 1,04,500 crore in 2011 or 1.16 per cent of India's GDP.