Health groups lobby for higher tax on tobacco products

Tax revenue from tobacco could significantly contribute to the increased need for resources during the pandemic, experts said

Public health groups, along with economists and doctors, have urged the government to increase excise duty on all tobacco products in the Union Budget of 2022-23 to generate additional revenue. In their appeals to the Finance Ministry, they have sought an increase in excise duty on cigarettes, bidis and smokeless tobacco.

According to them, 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 as well as Covid related co-morbidities, they said.

The tax revenue from tobacco could significantly contribute to the increased need for resources during the pandemic, including vaccinations and augmenting the health infrastructure, Bhavna Mukhopadhyay, Chief Executive, Voluntary Health Association of India, said in a statement.

Also Read — 'One in three students below high school level consume tobacco in UP'

"Increasing excise duty on all tobacco products will fetch substantial revenue for Central government and make tobacco products less affordable, especially for youngsters. This will provide a solid foundation for reducing tobacco usage among vulnerable populations and have long-lasting impact on the lives of the country's 268 million tobacco users, deter children and youth from initiating tobacco use," Mukhopadhyay said.

She requested the finance minister to augment revenue and reduce health harms, which would be appreciated by citizens.

The Ministry of Finance, in its reply to a question in the ongoing Winter Session of Parliament, specified that the central excise and cess (NCCD) collected on tobacco products during 2018-19 was Rs 1,234 crore, in 2019-20, it was Rs 1,610 crore and in 2020-21, it was Rs 4,962 crore.

The taxes collected from tobacco, similar to taxes collected from other sources, together form part of the overall Gross Tax Revenues (GTR) of the Government of India and are used to fund all its schemes and programmes, it said.

Also Read — India likely to achieve 30% reduction in tobacco use by 2025: WHO

The share of central excise duties in the total tobacco taxes has decreased from 54 per cent to 8 per cent for cigarettes, 17 per cent to 1 per cent for bidis, and 59 per cent to 11 per cent for smokeless tobacco products, on average, from 2017 (pre-GST) to 2021 (post-GST), Rijo John, health economist and adjunct professor, Rajagiri College of Social Sciences, Kochi said.

Several countries in the world have high excise taxes along with GST or sales tax and they are continuously being revised. Yet, the excise duty on tobacco in India continues to remain extremely low, he said.

"Tobacco industry in India has been virtually enjoying an extended tax-free season on tobacco products over the past four years since the introduction of the GST as there hasn't been any major increase in tobacco taxation during this time. This has made many tobacco products more affordable. It could turn out to be highly detrimental to public health and potentially reverse some of the tobacco use prevalence reduction India achieved during 2010 – 2017," John said.

The Union budget must take a considerate view of public health and increase tobacco taxes significantly, especially on bidis, he said.

Also Read — India among countries with lowest quit rates for smoking, says new report

The total tax burden (taxes as a percentage of final tax-inclusive retail price) is only about 52.7 per cent for cigarettes, 22 per cent for bidis and 63.8 per cent for smokeless tobacco. This is much lower than the World Health Organization (WHO) recommended tax burden of at least 75 per cent of retail price for all tobacco products, John said.

According to the WHO, raising the price of tobacco products through tax increases is the most effective policy to reduce tobacco use. Higher tobacco prices, which decrease affordability, encourage quitting among users, prevent initiation among non-users, and reduce the quantity consumed among continuing users.

"There is substantial proof that tobacco increases the risk for severe Covid infection and complications following it. Tobacco users have a greater risk of death following Covid. It is in the interest of users as well as the country to increase taxes on all tobacco products. This will reduce their affordability and consumption. It will then limit the vulnerability to Covid infection and its complications," said Pankaj Chaturvedi, Head Neck Cancer Surgeon, Tata Memorial Hospital.

India has the second-largest number (268 million) of tobacco users in the world, with around 1.3 million deaths every year from tobacco-related diseases. Nearly 27 per cent of all cancers in India are due to tobacco, Chaturvedi said.

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