THD NewsDesk, New Delhi: In a move to increase the revenue stream of the Indian economy, a collective of public health groups, doctors and economists have requested the GST council to impose increased compensation cess on all tobacco products on Tuesday, 25th of August, 2020. This move is expected to increase the tax revenue by an approximate of Rs 50,000 crore.
Compensation cess is set by the GST regime to reimburse manufacturing states for the drop in tax revenue. It would also help the Central government to disburse their dues, according to the public health groups.
The compensation cess has been requested to be applied on beedis and to be increased on cigarettes and smokeless tobacco products.
“Unprecedented financial resources will be needed for the country to recover from the economic shock Covid-19 has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted, compensation cess on tobacco could be a win-win measure as it will discourage tobacco consumption while bringing in substantial revenue for the government,” said Rijo John, economist and health policy analyst.
Despite the slight increment in the financial burden on the public, the COVID-19 pandemic has put an unprecedented burden on the country’s economy, which would require measures that have never been taken before to recover.
The GST revenue receipts of the central government as well as state governments have been severely affected due to the pandemic. As a consequence, the Centre has been unable to dispense the compensation cess due to each state under the GST.
As per John, if there is a compensation cess of Re 1 on each stick of beedi and a significant rise in cigarette and other smokeless tobacco products is supposed to generate the Rs 50,000 crore tax revenue.
According to Ashim Sanyal, the chief operating officer of Consumer VOICE, not only will this move increase the tax revenue and benefit the economy but also be beneficial for the people motivating many to quit smoking and many others from taking up smoking.
With reduced affordability and consumption, there will be significant health benefits, including better chances of surviving COVID19 infection. Tobacco consumption has been proven to damage the heart and cause other respiratory illnesses and escalate breathing issues in people infected with COVID-19.
As Dr. Harit Chaturvedi, Chairman of Max Institute of Cancer Care said,
“Early evidence from China and Italy has found that patients with underlying health conditions and risk factors, including smoking and diseases linked to smoking, maybe at a greater risk for severe outcomes or death from Covid-19.”
Total taxes for all tobacco products should include a minimum of 75% of the retail price.
“Currently, the total tax burden (tax expressed as a percentage of the final retail price) is only 49.5 percent for cigarettes, and 63.7 percent for smokeless tobacco in India, well below the minimum recommended by the WHO. Bidis, on the other hand, enjoy an extremely low tax burden of only 22 percent despite being at least as harmful as cigarettes, and are smoked by almost twice as many Indians as cigarettes, resulting in estimated annual economic costs from diseases and deaths to the tune of Rs 805.5 billion,” explained John.
Adding to this, Dr. Chaturvedi said,
“There is ample evidence about bidis being the killer and not the pleasure of the poor. These should be made unaffordable for the poor to save them from a lifetime of misery and suffering.”
In India people in pre- COVID-19 times died at the rate of 12 Lakh per year from tobacco-related diseases, making it the second-largest number of tobacco users worldwide. In such a worrisome situation, the increment in the compensation cess will be a welcome move on the part of the GST council and may help decrease the number of fatalities per year.