[op-ed snap] The price prescription

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Mains Paper 2: Governance | Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: It is an interesting newscards, as it discusses the relationship between the GST and tobacco consumption in India.


News

Context

  1. India is the second largest consumer and producer of tobacco-based products — categorised as sin goods or demerit goods
  2. And it has become imperative for policymakers to devise measures(including taxation regime) to effectively curb their use

Health of a citizen has primacy: SC

  1. The SC has recently stayed a Karnataka High Court order
  2. The HC order had set aside the 2014 amendment rules to the Cigarettes and Other Tobacco Products Act, 2003
  3. This(stay) is in contrast to the High Court order that viewed the 2014 rules violating constitutional norms as being an “unreasonable restriction” on the right to do business and earn a livelihood
  4. The Supreme Court observed that the “health of a citizen has primacy”

WHO’s survey on tobacco consumption in India

  1. The WHO’s Global Adult Tobacco Survey (GATS 2016-17) highlights India’s distinct pattern of tobacco consumption in multiple forms such as cigarettes, bidis, chewing tobacco and khaini (smokeless tobacco)
  2. This is in contrast to the global trend of cigarettes being the primary source of consumption
  3. The average unit price of a bidi or smokeless tobacco is significantly lower than of a cigarette
  4. Therefore, the former is a cheaper source for consumers who are mostly from the low-income segment of society

Effects of the GST on tobacco consumption

  1. The nationwide implementation of the goods and services tax (GST) has not improved the situation either
  2. All tobacco-related products have been placed in the 28% tax slab
  3. There has only been a marginal rise in the price of bidi for other pack sizes after the roll-out of the GST
  4. In comparison, the price rise post-GST is much higher for cigarettes
  5. Therefore, one may be able to postulate that the GST roll-out has not had much of an impact either
    (1) on the pricing of various tobacco products or
    (2) in reduction of the vast disparity between its different variants
  6. The impact has been negligible in the case of bidis

What should be done?

  1. The revisions in the taxation policy concerning tobacco products should ideally have a mix:
    (1) of a removal of all excise and other tax exemptions irrespective of the size of the unit,
    (2) restrictions on sales of loose sticks and raising taxes/duties on bidis and smokeless tobacco by a significantly higher level
  2. Keeping in mind the increased probability of health-related issues among low-income poor households and the health-care burden
Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.
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