From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Cancer related fatality in India
Tobacco use is known to be a major risk factor for several non-communicable diseases in India.
Tobacco abuse in India
- In India, 28.6% of adults above 15 years and 8.5% of students aged 13-15 years use tobacco in some form or the other.
- This makes the country the second-largest consumer of tobacco in the world.
Concern: No action against Tobacco
- India bears an annual economic burden of over ₹1, 77,340 crores on account of tobacco use.
- There has been no major increase in taxation of tobacco products to discourage the consumption of tobacco in the past four years since the introduction of GST.
- Only in 2020-21, the Union Budget had the effect of increasing the average price of cigarettes by about 5%.
- Yet, the excise duty on tobacco in India continues to remain extremely low.
A worrying trend
- No increase in tax: The absence of an increase in tax means more profits for the tobacco industry and more tax revenue foregone for the government.
- Revenue losses: This revenue could have easily been utilized during the COVID-19 pandemic.
- Losses due to GST: There has been a 3% real decline in GST revenues from tobacco products in each of the past two financial years.
Present governance of Tobacco
- GST slab: Tobacco at present is a highly taxed commodity. It is kept in the 28% GST slab (other than for tobacco leaves which is taxed at 5%).
- Heavy cess: Tobacco and its various forms are also subject to a heavy burden of cess, given that the commodity is seen as a sin good.
- Statutory warning: The government also uses pictures of cancer patients on the packages of cigarettes to discourage its use.
- Excise taxes on many tobacco products used to be regularly raised in the annual Union Budgets before the GST.
- Similarly, several State governments used to regularly raise value-added tax (VAT) on tobacco products.
- During the five years before the introduction of the GST, most State governments had moved from having a low VAT regime on tobacco products to having a high VAT regime.
Implication of such policies
- Increased consumption: The lack of tax increases in post-GST years might mean that some current smokers smoke more now and some non-smokers have started smoking.
- Reverse trend in decline: This could potentially lead to a reversal of the declining trend in prevalence.
- Affordability: Tobacco products are more affordable post-GST as shown in recent literature from India.
- Missing up national target: This might jeopardise India’s commitment to achieving 30% tobacco use prevalence reduction by 2025 as envisaged in the National Health Policy of 2017.
- Several countries in the world have high excise taxes along with GST or sales tax and they are continuously being revised.
- We must adhere to the WHO recommendation for a uniform tax burden of at least 75% for each tobacco product.
- The Union government should take a considerate view of public health and significantly increase excise taxes — either basic excise duty or NCCD — on all tobacco products.
- Taxation should achieve a significant reduction in the affordability of tobacco products to reduce tobacco use prevalence and facilitate India’s march towards sustainable development goals.