Ahead of the Budget Session, health economist, Rijo M John, has urged the Government to increase the tax on ‘sin product’ tobacco in the Union Budget 2022-23 and invest the generated revenue in improving the country’s health infrastructure, reeling under the Covid-19 pandemic.
John pointed out that there is a need to enhance tax on tobacco given that smoking is a known risk factor for many respiratory infections particularly with Covid-19, compared to non-smokers. "It is time that prices on tobacco products like cigarettes are raised with an aim to reduce their consumption which is taking a toll on the health and economic condition of the users."
But, unfortunately, the public health analyst from Kerala lamented, there has been no major increase in taxation of tobacco products since the introduction of the Goods and Services Tax (GST) in 2017. The excise duty on tobacco in India continues to remain extremely low, he said.
“Many state governments used to increase VAT to discourage the use of tobacco consumption before the GST came into the picture.”
As a result, tobacco is currently an affordable item for many, said John recently at a Twitter Space organized by a group of citizens under the platform “TobaccoFreeIndia.”
“If taxes are not increased urgently and significantly, some of the hard-won gains achieved in tobacco consumption reduction in the past few years in India might reverse at the cost of the economy and public health,” John said. He added that “In contrast, several countries have high excise taxes along with GST or sales tax and they are continuously being revised to bring down tobacco consumption.”
In fact, several studies show that a price increase of 10% results in a 2.5% – 5% smoking reduction in the short run and possibly up to 10% in the long run, if prices are increased to keep pace with inflation. Young people may reduce their smoking at two to three times the rate of older people, thus helping cut down millions of deaths.
The economic burden due to tobacco product consumption on the country is staggering. It's as high as Rs 1,77,000 crore keeping in account health expenditure and premature deaths due to tobacco consumption. India is the second largest consumer of tobacco in the world.
Around 13 lakh deaths are attributable to tobacco consumption annually in India i.e. 3,600 deaths daily.
He stated that the lack of tax increase means that the tax burden on tobacco products (tax as a percentage of the retail price) decreases.
While the World Health Organization (WHO) has been recommending a uniform tax burden of at least 75% for each tobacco product, in India, the tax burden on bidis, cigarettes, and smokeless tobacco, on average, stands at 22%, 53%, and 64% in 2021.
Sources said that the Government is serious about the health impact of tobacco on the people in Covid-19 times.
The proposed amendments to the Cigarettes and Other Tobacco Products Act (COTPA) bill which has several landmark provisions like ban on tobacco consumption in public places might see light of the day in the Budget Session.
John pointed out that besides raising GST on tobacco, the Government could use other channels such as national calamity contingent duty (NCCD) or Compensation Cess to increase prices of cigarettes and bidis.
In India, around 28 per cent of adults above 15 years and 8.5 per cent of school students aged 13-15 years consume tobacco in some form or the other.