Pre-cum-Mains GS Foundation Program for UPSC 2026 | Starting from 14th Nov. 2024 Click Here for more information
Context
Post-GST, we need a more targeted taxation and retail policy on tobacco products
What
India is the second largest consumer and producer of tobacco-based products — categorised as sin goods or demerit goods — and it has become imperative for policymakers to devise measures to effectively curb their use.
Health comes first
- The Supreme Court recently stayed a Karnataka High Court order setting aside the 2014 amendment rules to the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 that prescribed tobacco packages having pictorial warnings covering 85% of the package space
- The Supreme Court observed that the “health of a citizen has primacy”
A skewed pattern
The World Health Organisation’s Global Adult Tobacco Survey (GATS 2016-17) highlights India’s distinct pattern of tobacco consumption in multiple forms:
- In India, bidis, chewing tobacco and khaini form 89% of consumption as against 11% for cigarettes.
Question arises
What explains such a skewed pattern?
Due to Unit level pricing
- If we look at the competitive dynamics and pricing, a key reason for such disparity is because it is based on the unit-level pricing of multiple forms of tobacco. The average unit price of a bidi or smokeless tobacco is significantly lower than of a cigarette
- Therefore, the former is a cheaper source for consumers who are mostly from the low-income segment of society.
After GST
The nationwide implementation of the goods and services tax (GST) has not improved the situation either
All tobacco-related products have been placed in the 28% tax slab
NCCD
Additionally, a National Calamity Contingent Duty (NCCD) and a cess charge have been imposed on cigarettes and smokeless tobacco
Not much effect of the GST
- The GST roll-out has not had much of an impact either on the pricing of various tobacco products or in reduction of the vast disparity between its different variants
- The impact has been negligible in the case of bidis.
Way forward
- The revisions in the taxation policy concerning tobacco products should ideally have a mix: of a removal of all excise and other tax exemptions irrespective of the size of the unit, restrictions on sales of loose sticks and raising taxes/duties on bidis and smokeless tobacco by a significantly higher level to narrow the gap between the price of bidis and smokeless tobacco vis-à-vis cigarettes keeping in mind the increased probability of health-related issues among low-income poor households and the health-care burden.
