Institute of Public Health appeals to the GST council for HIGHEST tax on tobacco

Bengaluru CITY, October 17th 2016: The Institute of Public Health (IPH) is an institutional response to the gaps in the public health systems. It is a not- for-profit organization registered in 2005 as a charitable society under the Karnataka Societies Registration Act. IPH has been working on the issue of tobacco control for more than eight years. IPH has appealed to the GST council to recommend and accept a highest possible tax rate under GST on all types of tobacco including cigarettes, bidis, smokeless tobacco and pan masala to discourage their consumption and addiction amongst Indians and safeguard public health. 

It has been proven globally that the most direct and effective method for reducing tobacco consumption is to increase their price through tax increases. Higher taxes are particularly effective in reducing tobacco use among vulnerable populations, such as youth, pregnant women, and low-income smokers. An increase in tobacco prices by 10 percent decreases tobacco consumption by 4 percent in high-income countries and by about 6 percent in low- and middle-income countries.  India has the second largest number of tobacco users (275 million or 35% of all adults in India) in the world. Each year, about 1 million Indians die from tobacco-related diseases and if current trends continue, tobacco will account for 13% of all deaths in India by 2020. Tobacco-use imposes enormous health and economic burden on the country as tobacco-attributable direct medical costs alone are around 21% of national health expenditure. 

The current taxation system differentiates between various forms of tobacco products (such as bidis, smokeless tobacco and cigarettes) while imposing taxes. Considering that bidi smoking is considered to cause about 2 - 3 times greater nicotine and tar inhalation than cigarettes, due to the poor combustibility of the bidi wrapper and greater puff frequency needed to keep the bidi alight.[i] it is most critical that ALL tobacco products are included within GST and under the highest category for demerit or sin products to attract maximum tax.  

According to the 2015 WHO Report on the Global Tobacco Epidemic, India is one among the very few countries where cigarettes have become more affordable over the past few years – not getting the treatment of tobacco products right under the new GST system will only make matters worse and cause many more premature deaths.  

Even as the industry is opposing the recommendations to impose the ‘sin tax’ rate of 40 percent on tobacco, it is important to note that tobacco taxation in India is way below global standards. The current rates for even cigarettes and smokeless is significantly less than that recommended by the World Bank’s 2/3rd (tax should be 67% of retail product price) and the WHO (tobacco excise taxes should account for at least 70% of the retail price).[ii]  According to Dr. Rijo John of IIT Jodhpur, “A recent report from WHO shows that current cigarette taxes as a percentage of retail prices in India are lower than even neighboring countries such as Sri Lanka and Bangladesh and rank 80th in the world. A 40% GST rates + central excise duty at the current levels would just about maintain the current tax burden on tobacco products. It is also important to allow states to maintain their right to impose top-up taxes on tobacco products, in order to actually make tobacco and tobacco products less affordable over time.”
According to, Dr. Upendra Bhojani, Assistant Director at the Institute of Public Health “The GST regime should ideally act as a deterrent to the consumption of health hazard causing substances such as Cigarettes, Bidis etc. through higher taxes. All differentiations should be done away with regards to tobacco and tobacco products and taxed at the highest slab under GST, since lower GST rates would contribute to their affordability and end up promoting their increased consumption amongst most vulnerable sections of population pushing them below the poverty line.”  

Bidis which comprise 48 percent of the tobacco market, (as compared to chewing tobacco which is 38 percent and cigarettes 14 percent) have been subjected to very low central and state taxes under the false pretext of protecting bidi rollers’ livelihood. However, the reality is that low taxes and exemptions only benefit the bidi industry owners. “We strongly support the highest level of tax for bidis under GST and petition that some of these bids taxes are used to improve our wages/living conditions as well as provide alternative livelihoods”, says, Nazim Ansari, Secretary Abul Kalam Azad Jan Sewa Sansthan (representing around 6000 bidi workers in Uttar Pradesh). He emphasized how critical it is to effectively regulate and tax all forms of tobacco uniformly under GST regime to protect India’s most vulnerable populations – the time has come for the government to step up to protect India’s 67.5 million bidi smokers from an untimely and painful death. 

Therefore, IPH appeals to the GST Council that Tobacco and tobacco products including bidis be taxed at the highest rate under GST with imposition of an additional central excise duty and a provision for states’ right to impose top-up taxes be retained.  A healthy and productive citizen will contribute more to nation building and help in realizing India’s dream of becoming a world economic power. 

[1] M Rahman* and T Fukui. Bidi smoking and health. Public Health (2000) 114, 123-127.
[1] In 1999, the World Bank announced a yardstick after observing that the tax accounts for two-thirds to four-fifths of the retail price of cigarettes in countries with comprehensive tobacco control policies. See also WHO’s Technical Manual on Tobacco Tax Administration. Geneva, World Health Organization, 2010.