GUWAHATI, Nov 1 - Expressing serious concern over the proposal of the GST Council for 26 per cent sin tax on tobacco, public health advocates, including the Voluntary Health Association of Assam (VHAA), an NGO, said a sin tax rate below 40 per cent will negatively impact revenue and public health.
The VHAA reiterated its demand for at least 40 per cent sin tax with a provision for states’ right to impose top-up taxes on all types of tobacco, including cigarette, bidi, smokeless tobacco and pan masala to discourage their consumption and addiction among people, especially among the youth.
There is certainly an overarching consensus that goods that are harmful to society categorized as ‘sin’ such as tobacco be taxed at the highest rate under GST as recommended in the Chief Economic Advisor’s report that seeks a 40 per cent GST sin rate on all tobacco products, including cigarette, bidi and chewing tobacco, the voluntary health body said.
VHAA executive secretary Ruchira Neog said the GST Council meeting that concluded on October 20 proposed a much lower 26 per cent GST sin rate which would have “significant impact on the revenue as well as the health of our nation”, both of which require serious consideration.
“The rationale for a sin tax is twofold, to pay for the damage caused to society by products like tobacco, and secondly, to increase the price and reduce their usage,” she said.
“A 26 per cent rate would defeat both purposes – it would significantly reduce current revenue from tobacco and would actually make tobacco products more affordable and encourage consumption, especially among vulnerable population, including children and youth,” Neog said.
According to Dr Rijo John, Assistant Professor, IIT Jodhpur, “Compared to a GST sin rate of 40 per cent, imposing a 26 per cent sin rate would reduce total tobacco tax revenue by almost one-fifth (17 per cent, or roughly Rs 10,510 crore) even if the government retains the current excise on tobacco products post-GST. Clearly, 26 per cent sin rate will be well below the rate required to maintain a revenue neutral position for tobacco and will significantly reduce tax burden on all tobacco products since the existing average VAT rates themselves are higher than 26 per cent on most tobacco products.”
Dr John has been working on tobacco taxation and is co-author of various reports and studies on tobacco taxation.
Tobacco-use imposes enormous health and economic costs on the country. The total economic costs attributable to tobacco use in Assam amounted to Rs 541 crore in the year 2011 for persons aged 35-69, of which 47 per cent were direct medical costs and 53 per cent were indirect morbidity costs.