Health taxes are excise taxes imposed on products such as tobacco that have a clear negative public health impact.
Public health groups along with doctors and economists have urged the government to increase excise duty on all tobacco products in the Union Budget 2024-25 to generate additional revenue. In their appeals to the Finance Ministry, they asked for an increase in health taxes on cigarettes, bidis and smokeless tobacco.
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Health taxes are excise taxes imposed on products such as tobacco that have a clear negative public health impact. According to these experts, among the several public policy tools to regulate the consumption of tobacco, increasing the excise tax is considered to be one of the most cost-effective, based on a substantial body of research from around the world.
Health taxes, also known as sin tax, are often used by many countries to achieve this. According to a recent study, cigarettes, bidis and smokeless tobacco have become increasingly affordable over the past 10 years.
Recently, there has been a minor increase in National Calamity Contingent Duties (NCCD) on cigarettes, but apart from that, there has not been any major increase in tobacco taxes since the introduction of GST in July 2017, said Dr Rijo John, health economist and adjunct professor, Rajagiri College of Social Sciences, Kochi.
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Adding the current GST rate, compensation cess, NCCD, and Central Excise, the total tax burden (taxes as a percentage of final tax inclusive retail price) is only about 49.3 per cent for cigarettes, 22 per cent for bidis and 63 per cent for smokeless tobacco, he said.
WHO recommends a tax burden of at least 75 per cent of retail price for all tobacco products. The existing tax burden on all tobacco products is far lower than this.
“Given that more than six years have passed since the implementation of the GST, and there has been no substantial tax hike on tobacco products during this period, it is crucial for the Union government to consider increasing taxes on tobacco beyond minor increments in NCCD, which make up less than 10 per cent of the overall taxes imposed on tobacco.
“When the government refrains from raising taxes on tobacco, the tobacco companies independently elevate prices, thereby boosting their profits. Consequently, the augmented revenue that the government could have collected is redirected toward industry profits,” Dr John said.
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According to the experts, increasing excise on all tobacco products can be a very effective policy measure to address the immediate need to raise revenue by the central government. It will be a winning proposition for generating revenue and reducing tobacco use and related diseases.
“Tobacco use which is a slow-moving pandemic itself claims the lives of 13 lakh Indians each year. It is critical than ever before to keep tobacco products out of the hands of vulnerable populations like youth and the underprivileged sections of society. Nearly 50 per cent of all cancers in India are due to tobacco. It is in the interest of the users as well as for the country to increase taxes on all tobacco products. This will reduce their affordability and consumption,” said Dr Pankaj Chaturvedi, Head Neck Cancer Surgeon, Tata Memorial Hospital.
The Parliament Standing Committee on Health recently submitted a pertinent and comprehensive report on Cancer Care Plan and Management in which it undertook a detailed study of the causes of Cancer in India and noted with concern that in India, “the highest number of lives lost is due to oral cancer caused by tobacco, followed by cancer of the lungs, oesophagus and stomach.”
It also noted that tobacco use is one of the most prominent risk factors associated with cancer. In view of these alarming observations, the Committee has noted that India has one of the lowest prices for tobacco products and there is a need to increase taxes on tobacco products. The Committee recommended the government to raise taxes on tobacco and utilize the additional revenue gained for cancer prevention and awareness.
India has the second largest number (268 million) of tobacco users in the world and of these 13 lakhs die every year from tobacco-related diseases, experts said.
Nearly 27 per cent of all cancers in India are due to tobacco.
