Even a primary school child knows that tobacco causes cancer. It defies all logic that it remains freely available and a profitable fast-moving consumer good.
India is host to nearly 30 crore tobacco users – 35% of all adults in the country. According to the World Health Organisation, every third tobacco user dies prematurely of diseases such as cancer and heart attack. The death toll attributable to tobacco is staggering at 10 lakh every year. Continued use of tobacco and tobacco products not only affects primary users but “environmental tobacco smoke”, commonly referred to as second-hand or passive smoke, can also damage the health and DNA of others inhaling it.
As an oncologist, I have seen the end result of tobacco consumption. I have also seen how much victims and families suffer in this process and regret in the end.
Tobacco isn’t just a health issue but also one linked to women’s empowerment, social justice, poverty, child welfare, human rights, and the environment among others. One of the most effective ways of reducing tobacco use is to raise the tax on it. Higher prices discourage beginners from initiating the habit and encourage current users to quit.
The estimated direct and indirect healthcare cost related to tobacco use is Rs 1 lakh crore ($17 billion). This amounts to a loss of 1.1% of India’s gross domestic product. The enormous public health costs are substantially borne by the individuals or resource-crunched public health system. This financial burden will become shockingly manifold if we take into account the loss of livelihood or productivity as a result of prolonged illness and death of sole breadwinners.
Ineffective tax
A sin tax – levied on goods that are deemed harmful to society, such as tobacco – goes towards offsetting this enormous health cost, though it is usually a small consolation.
On October 20, the Goods and Services Tax Council proposed a 26% GST sin tax rate, shocking public health activists. This was contrary to the recommendation of an expert committee of the Finance Ministry that, after serious consideration of all parameters, recommended a 40% sin rate on all tobacco products, including cigarettes, bidis and chewing tobacco. Having said that, the World Health Organisation recommends setting tobacco taxes to account for at least 70% of the retail price.
This ridiculously low tax would amount to making tobacco products cheaper in the GST era. A sin tax is intended to compensate for losses and reduce consumption, but a GST of 26% would dry government coffers and encourage consumption among vulnerable populations. It would also invite global condemnation.
According to health economist Dr Rijo John of the Indian Institute of Technology, Jodhpur, a 26% sin rate would reduce total tobacco tax revenue by almost one-fifth (17% or roughly Rs 10,510 crores) even if the government were to retain the current excise on tobacco products post-GST.
Clearly, a 26% sin rate is inadequate to maintain a revenue-neutral position. It amounts to slashing the tax burden on all tobacco products since the existing average value-added tax rates are higher than 26% on most of these goods.
Dinesh Trivedi, parliamentarian and former health minister, rightly said, “The government should make tobacco prohibitively expensive in the GST era. There is no justification for giving any subsidy to a product that kills every second user prematurely.”
Moreover, according to a UN convention in 2010, there is a fundamental conflict between the tobacco industry and public health.
Increasingly affordable
Tobacco – irrespective of its form, whether bidis, cigarettes or chewing tobacco – is the leading cause of cancer and cancer deaths. Bidis are the most popular tobacco product used in India, accounting for nearly 85% of total smoked products. Their sales are nearly eight times that of cigarettes.
The overall cost of tobacco in India is low. And it is lowest for the most widely consumed products, such as bidis and chewing tobacco. The result is that tobacco products have become increasingly affordable over the past decade.
A 40% sin rate combined with the existing excise tax and top-up state rights to tax tobacco appears to be the best scenario for public health and revenue. This will not only help India maintain the current tax burden on tobacco, it will also prevent more Indians from falling prey to life-threatening diseases and being caught in a vicious cycle of ill-health and poverty.
It is also time for all promotional schemes offered to the tobacco industry to be phased out systematically, with time-bound efforts to rehabilitate farmers and others who earn their livelihood from tobacco.
In the words of Prime Minister Narendra Modi, “Let us pledge to spread awareness on the risks of tobacco consumption and work to reduce tobacco consumption in India. Tobacco not only affects those consuming it but also people around. By saying no to tobacco, let us lay the foundation of a healthier India.”
The goods and services tax gives the GST Council ample opportunity to correct the distortions in India’s policy on tobacco taxation and send a strong message to the world on how much they care for the health of ordinary citizens.
The writer is a professor and surgeon at Tata Memorial Hospital, Mumbai.
