New Delhi: 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. This plea has come with two ideas in mind. First is to prevent the use of tobacco products and secondly to generate additional revenue. In their appeals to the Finance Ministry, the health groups 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-19 related co-morbidities, they informed.
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.
“Increasing excise duty on all tobacco products will fetch substantial revenue for central government. It will 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 India’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 crores.
The taxes collected from tobacco, similar to taxes collected from other sources, together form part of the overall Gross Tax Revenues (GTR) of Government of India and are used to fund all its schemes and programmes, the finance ministry said.
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 informed.
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 stated.
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 informed.