Economists, health experts push for steep hike in taxes on tobacco products

With consumption of tobacco products claiming the lives of over 13 lakh people in the country every year, economists and health experts suggested a steep increase in the tax rates on tobacco products to disincentivise consumers from purchasing them.

With consumption of tobacco products claiming the lives of over 13 lakh people in the country every year, economists and health experts suggested a steep increase in the tax rates on tobacco products to disincentivise consumers from purchasing them.

Currently, the Centre imposes 53% tax on cigarettes, 16% on beedi, and 64% on smokeless-tobacco products. Taxes on tobacco products have largely remained unchanged in the post-GST regime. “With Indian people largely price sensitive,” they suggested hike in taxes.

In his remarks at the “Consultation workshop on tobacco taxes: a tool for health and economic gains” at the Institute for Social and Economic Change (ISEC), Bengaluru, Health and Family Welfare Minister Dinesh Gundu Rao said increase of “health tax” or excise tax on tobacco is one of the most effective tools for reducing tobacco consumption”. The department would strictly enforce a ban of sale of tobacco products within 100 metres radius of educational institutions in the State.

Economists S. Madheswaran, ISEC; Rijo M. John of Rajagiri College, Kochi; public health experts Narender Kumar, principal consultant, National Policy, Campaign for Tobacco-Free Kids (CTFK), New Delhi; and Upendra Bhojani, director, Institute of Public Health, Bengaluru, said that the nexus between various stakeholders and conflicting priorities of various Central Ministers led to stagnation of taxes in the post-GST regime.

They said that India has one of the lowest prices for tobacco products and there is a need to increase taxes. The Parliament Standing Committee on Health in its 139 report (2022) too recommended a hike in taxes, they said. They proposed a tax rate of 75% each on cigarettes and smokeless tobacco and 63% on beedi. More than 40 countries have levied 75% taxes on tobacco to discourage people from its consumption.

Mr. Madheswaran said India has close to 30 crore tobacco users - 20 crore smokeless tobacco users and 10 crore smokers - which is 28.6% of the population.

The annual economic costs from all tobacco products for the population aged above 35 was estimated at ₹1,773.4 billion in the year 2017 amounting to 1.04% of India’s GDP. “It is found that for every ₹100 that was received as excise taxes from tobacco products, ₹816 of costs is imposed on society through the consumption of tobacco and spending on tobacco use-induced diseases. Tobacco use is also known to impoverish 15 million Indians every year, ” Mr. Madheswaran said.