Free Press Journal

NCHSE urges GST council to levy sin tax on tobacco


Current cigarette taxes in India are lower than even Sri Lanka and Bangladesh and rank 80th in the world

BHOPAL: The National Centre for Human Settlements and Environment (NCHSE), a non-government organisation, has urged the Goods and Service Tax (GST) council to levy the highest tax rate of 40 per cent under the GST regime on all forms of tobacco products including cigarettes, bidis, smokeless tobacco as well as pan masala to discourage their use and addiction, especially amongst the poor and youth.

It has been proven globally that the most direct and effective method of reducing tobacco consumption is to increase the price of tobacco products through tax increases. Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, and low-income smokers. A comprehensive economic reform like GST offers the government a unique opportunity to tax tobacco uniformly at the highest GST rate of 40% and save millions of Indians from dying prematurely of tobacco related diseases.

Tobacco-use imposes enormous health and economic burden on the country.  Each year, almost 1 million Indians die from tobacco-related diseases in India.  The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rs 1.04 lakh crore in 2011 or 1.16 per cent of GDP. Tobacco-attributable direct medical costs alone are around 21 per cent of national health expenditure.  Indeed the costs of tobacco are far greater than what the Indian government/states gain in tobacco excise revenue (just 17% of total health cost).

Even as the industry is opposing the recommendations to impose the ‘sin tax’ rate of 40 percent on tobacco, tobacco taxation in India is way below global standards. A 40 per cent GST rates with central excise duty at the current levels would just about maintain the current tax burden on tobacco products. It is also important to allow states to maintain their right to impose top-up taxes on tobacco products.”