Health Ministry calls for hike in taxes on tobacco products

February 29, 2016 12:00 am | Updated 05:44 am IST - NEW DELHI:

Says current excise and VAT rates are not sufficient to increase the price

The Union Health Ministry has written a letter to the Ministry of Finance to increase taxes on tobacco products in the upcoming Finance Budget of 2016-17.

The letter highlights the recent study undertaken by the Ministry in collaboration with the World Health Organisation (WHO) India to evaluate the impact of tobacco taxation in India and to examine whether current tax levels are adequate to make the tobacco products less affordable over time.

The letter further highlights that the current excise and VAT rates are not sufficient to increase the price of tobacco products so as to make these products unaffordable.

The Health Ministry has further recommended that not only the tax on all types of tobacco products should be increased substantially, but the tobacco tax regime should also be broadened to include manufacturing of tobacco products by the informal sector under the tax net.

Health activists have noted that information accessed through a Right to Information (RTI) application has revealed that the revenue generated on cigarette products has increased over the years due to the tax increase by the Government. However, the tax on beedi has always been exempted and there is no revenue increase as well.

According to them, beedis are the most commonly consumed tobacco product in India and are consumed disproportionately by the poor.

In fact, they are the largest consumed tobacco product in the country – representing 64 per cent of all tobacco consumption. However, tax collections from beedis are insignificant (approximately 0.33 per cent of total excised duty collections in 2011-12).

They add that beedis do not get adequate attention from a fiscal collection point of view and are ignored in each budget, with policy-makers claiming that increasing taxes on beedis will affect the livelihood of millions who depend on the trade.

The higher tax would also significantly reduce beedi consumption and prevent 15.5 million premature deaths among current and future beedi smokers, the activists believe.

Says tax regime should include manufacturing of tobacco products by informal sector

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