PANAJI
Civil society organizations along with doctors are urging the GST Council to increase compensation cess on all tobacco products to generate additional revenue for the government. In their appeals to the GST council before its meeting on September 17, they are urging it to consider an extraordinary 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 during the pandemic including vaccinations and augmenting the health infrastructure to prepare for a possible third wave. According to the group, increasing tobacco taxes in these challenging times will be a win-win policy as it can address the economic shock from the pandemic and directly reduce covid-19 related co-morbidities.
“There is substantial proof that tobacco increases risk for severe covid infection and complications following it. Tobacco users have a greater risk of death following covid. It is in the interest of the users as well as for the country to increase taxes on all tobacco products. This will reduce their affordability and consumption. It will then limit the vulnerability to covid infection and its complications,” states Dr Shekhar Salkar, oncologist at Manipal Hospital (Goa).
Tobacco use increases risk for severe covid infection, complications, and death. Available research suggests that smokers are at greater risk of developing severe disease and dying from covid.
“Unprecedented financial resources will be needed for the country to recover from the economic shock Covid-19 has created. 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,” states Ashim Sanyal, CEO, Voluntary Organisation in Interest of Consumer Education (VOICE).
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 % for cigarettes, 22 % for bidis and 63.8 % for smokeless tobacco. This is much lower than the World Health Organization (WHO) recommended tax burden of at least 75 % of retail price for all tobacco products.
Increasing the existing compensation cess on cigarettes and smokeless tobacco products and levying compensation cess on bidis can be a very effective policy measure to address the immediate need to raise revenue by the central government to compensate State governments for their respective GST revenue shortfalls during the pandemic time.
