Experts say it can rake in Rs. 50,000 crore as well as curb tobacco use
BENGALURU:
Public health groups, along with doctors and economists, are urging the GST Council to consider a special Covid-19 cess on tobacco products to raise funds for a Covid-19 stimulus package. A cess on cigarettes, bidis and smokeless tobacco products can bring in revenue of Rs. 49,740 crore, which could cover about 29% of the stimulus package.
Such a cess will also prevent the further spread of the virus, especially amongst vulnerable populations, by making tobacco products unaffordable and forcing them to quit. Based on studies conducted in several countries, smokers and smokeless tobacco users may be at greater risk of infection.
“Imposing a 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. Taxation is the most effective but least utilised tool to reduce tobacco consumption,” opined Dr. Vishal Rao, onco-surgeon and member of the Covid Consultative Group, an independent think tank. “This will double the revenues for the government and halve the deaths if acted on promptly,” he said.
According to Dr Rijo John, economist and health policy analyst, unprecedented financial resources will be needed for the country to recover from the economic shock created by the virus. “A Rs. 1 cess per stick of bidis and significant tax increases on cigarettes and smokeless tobacco products could generate additional tax revenue to the tune of Rs. 50,000 crore,” he said.
WHO recommends total taxes to represent at least 75% of the retail price for all tobacco products. Currently in India, the total tax as a percentage of the retail price is 49.5% for cigarettes and 63.7% for smokeless tobacco, well below the minimum recommended by WHO. Bidis enjoy an extremely low tax burden of only 22% despite being at least as harmful as cigarettes, and are smoked by almost twice as many Indians as cigarettes, resulting in an estimated annual economic cost from diseases and deaths to the tune of Rs. 805.5 billion, or 0.5% of India’s GDP.
India has the second largest number of tobacco users globally (268 million, or 28.6% of all adults in the country). 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% of India’s GDP.
