‘Put COVID-19 cess on tobacco products’: K’taka grp writes to GST council

The collective Movement for Youth Awareness wants the government to hike the prices of beedis, cigarettes and smokeless tobacco.
‘Put COVID-19 cess on tobacco products’: K’taka grp writes to GST council
‘Put COVID-19 cess on tobacco products’: K’taka grp writes to GST council
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A group of public health care professionals, activists and policy analysts in Karnataka are demanding a special COVID -19 cess on tobacco products to raise additional tax revenue for the government's COVID-19 stimulus package. For this, they have written to the GST (Goods and Services Tax) council appealing them to impose a COVID-19 cess on tobacco products.

The collective called the Movement for Youth Awareness wants the government to raise the price of beedis, cigarettes and smokeless tobacco. They urge that the price of each beedi be increased by Rs 1, each cigarette stick by Rs 5  and a 52% increase in smokeless tobacco

They claim this proposed additional cess will fetch the country an additional revenue of Rs. 49,740 crores (497.4 billion) which could cover about 29% of the stimulus package.

To make a case for their demand, the gorup has said that India does not follow the World Health Organisation recommendation of  at least 75% of the retail price for all tobacco products should be all taxes. Currently, the total tax burden (tax expressed as a percentage of final retail price) is only 49.5% for cigarettes, and 63.7% for smokeless tobacco in India, well below the minimum recommended by the WHO.  Beedis, on the other hand, enjoy an extremely low tax burden of only 22% despite being at least as harmful as cigarettes, and are smoked by almost twice as many Indians as cigarettes, resulting in an estimated annual economic costs from diseases and deaths to the tune of Rs. 805.5 billion, or 0.5% of India’s GDP. 

The group argued that this cess on all tobacco products will not only help raise the much needed revenue to fund the stimulus, it will also prevent the further spread of the virus especially amongst vulnerable populations by making tobacco products unaffordable and forcing them to quit.

They project there will be a drop in tobacco consumption by 35% for beedis, 17% for cigarettes and 10% for smokeless tobacco products. 

Based on studies conducted in several countries the advocates for this additional cess said that smokers and smokeless tobacco users may be at greater risk for severe illness when confronted with COVID-19 since it attacks the lungs and behaviours that weaken the lungs put individuals at greater risk. 

“Imposing cess on all tobacco products, including beedis, is a winning proposition for the government as it will provide the much-needed additional tax revenue for COVID 19 stimulus package for providing relief to the people of the country. Taxation is the most effective but least utilised tool to reduce tobacco consumption. This is a very relevant step in this pandemic, as we know that Covid virus has worst fatality in patients with comorbidities (Non communicable diseases) which are caused by tobacco”, opined Dr. Vishal Rao, Onco-surgeon and Member of the Covid Consultative Group an independent think tank in a statement.

“This will double the revenues for govt and half the deaths if acted promptly,“ he added

Similarly,  Rijo John, an economist and a health policy analyst said that the unprecedented financial resources will be needed for the country to recover from the economic shock COVID has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted, special COVID cess on tobacco, could be a win-win as it will discourage tobacco consumption and reduce COVID related risks while bringing in substantial revenue for the government.

He said, “Re 1 COVID cess per stick of beedis and significant tax increases on cigarettes and smokeless tobacco products are expected to generate additional tax revenue to the tune of Rs. 50,000 crores.’’

In a statement, they further said India has the second largest number of tobacco users (268 million or 28.6% of all adults in India) in the world – of these at least 12 lakhs die every year from tobacco related diseases. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04,500 crores in 2011 or 1.16% of India’s GDP.

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