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Written By: Editorial Team | Updated : August 6, 2013 11:58 AM IST
The Union health ministry has asked all states to either levy or increase VAT on all tobacco products cigarettes, smokeless tobacco (gutka, pan masala, etc.), snuff and beedis. This will help generate around Rs 73 billion in tobacco taxes for the government.
Tobacco is responsible for 40% of non-communicable diseases like cancer, cardiovascular diseases and lung disorders. 1 out of 3 cancer deaths are due to tobacco usage.
Studies estimate 10% rise in beedi prices would result in a 9.2% reduction in beedi consumption, while a 10% spurt in cigarette prices would reduce cigarette consumption by 3.4%. In India, 10 % deaths are attributed to tobacco use and it is estimated that by 2020, tobacco use will account for 13% of all deaths in India every year. Almost 35% adults (15 years and above) consume tobacco in India (47% men and 21% women).
Some states have started levying high rates of VAT on tobacco products - Rajasthan (40% VAT on all forms of tobacco), Gujarat (25% VAT), Odisha (25% VAT) and Jammu and Kashmir (30% VAT on all tobacco products).
Additional secretary in the ministry Keshav Desiraju stated in his letter that, "Tobacco use leads to a huge burden of disease, disability and death thus imposes high healthcare and productivity costs. As per health cost study conducted by the Indian Council of Medical Research, the cost of treatment of just three diseases caused by tobacco - cancer, lung disease and chronic obstructive pulmonary disease (COPD) accounted for roughly 25% of all public spending on health."
He added, "One of the effective ways to reduce tobacco consumption is by making the per unit price higher so as to make them unaffordable or the susceptible population such as the poor or children or youth. We are sure that levy of or increase in VAT on all tobacco products/inputs will support to prevent new initiation into tobacco use and encourage tobacco users to quit."
Bhavna Mukhopadhyay, executive director of Voluntary Health Association of India, said in the upcoming Union budget all tobacco containing products should be subjected to high rate of excise and VAT "to keep the next generation healthy. If tax on tobacco products is raised, government Income will increase while expenditure on health will go down. Today, tobacco products are affordable and easily accessible to minors."
Experts say taxes on tobacco products in India fall well below the rate recommended by the World Bank - from 65% to 80% of retail price. Taxes on beedis are very low, averaging only 9% of retail price, while cigarette taxes account for about 38% of the retail price. About 5,500 people start using tobacco products daily. It is estimated that raising the tax as a percentage of retail price from 7% to 33% for beedis and from 43% to 58% for cigarettes would lead to 14 million smokers quitting and 27 million children never starting. This will save 69 million years of healthy life over the next 40 years.
Over 12 crore Indians smoke and almost one in every three Indian consumes some form of tobacco product. Beedi smokers constitute of ove5 85% of all smokers and the tax levied on beedis make it accessible to almost everyone. In stark contrast cigarettes comprise less than 15% of all smoked tobacco, but contribute nearly 85% of tobacco taxes.
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