Public health groups urge govt to hike compensation cess on tobacco products

Raipur: Public health groups including Voluntary Health Association of India (VHAI), along with doctors and economists, have urged GST Council to increase compensation cess on all tobacco products to generate additional revenue for the government and use the collected revenue on health infrastructure

In its appeals to GST council, they are urging the government to consider an extra-ordinary measure of levying compensation cess on all tobacco products to get additional revenues. This tax revenue from tobacco could significantly contribute to the increased need for resources and augmenting the health infrastructure, according to information shared by VHAI.

There has not been any major increase in tobacco taxes since the introduction of GST in July 2017 and all tobacco products have become more affordable over the past three years. 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 Organisation (WHO) recommended tax burden of at least 75 per cent of retail price for all tobacco products. 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 that decrease affordability, encourage quitting among users, prevent initiation among non-users, and reduce the quantity consumed among continuing users.

“Increasing compensation cess on all tobacco products will be a win-win proposition as it will bring in substantial revenue for the Government while motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use,” said Bhavna Mukhopadhyay, chief executive, VHAI.

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.

India is home to the second greatest number of smokers in the world behind China. Additionally, tens of millions use deadly smokeless tobacco products. Approximately 130 million people of age 15 and older in India currently smoke and roughly half of all adults are exposed to second-hand smoke at home.