Hike Excise Duty On Tobacco Products In Budget 2022-23, Demand Doctors, Health Groups & Economists

The groups have demanded an increase in excise duty on cigarettes, bidis, and smokeless tobacco and believe that increasing the excise can also help in addressing the government's revenue targets.

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New Delhi: As the government has started preparing the annual budget 2022-23 likely to be presented in February next year, public health groups, economists, and doctors have urged the government to increase excise duty on all tobacco products to generate additional revenue.

What’s the demand regarding tobacco products?

In their appeals to the finance ministry, the groups have demanded an increase in excise duty on cigarettes, bidis and smokeless tobacco, according to the news agency PTI.

They believe that increasing excise on all tobacco products can be an effective policy measure to address the requirement of revenue targets by the central government.

According to them, the move will work as a winning proposition and help in generating revenue and reducing tobacco use and related diseases as well as Covid related co-morbidities.

The tax revenue from tobacco could significantly contribute to the increased need for resources during the pandemic, including vaccinations and augmenting the health infrastructure, Bhavna Mukhopadhyay, Chief Executive, Voluntary Health Association of India, said in a statement.

"Increasing excise duty on all tobacco products will fetch substantial revenue for central government and make tobacco products less affordable, especially for youngsters. This will provide a solid foundation for reducing tobacco usage among vulnerable populations and have a long-lasting impact on the lives of the country's 268 million tobacco users, deter children and youth from initiating tobacco use," Mukhopadhyay said.

What’s the tax collection on tobacco?

The ministry of finance, in its reply to a question in the ongoing Winter Session of Parliament, specified that the central excise and cess (NCCD) collected on tobacco products during 2018-19 was Rs 1,234 crore, in 2019-20, it was Rs 1,610 crore and in 2020-21, it was Rs 4,962 crore, as per PTI.

The taxes collected from tobacco, similar to taxes collected from other sources, together form part of the overall Gross Tax Revenues (GTR) of the government and are used to fund all its schemes and programmes, it said.

The share of central excise duties in the total tobacco taxes has decreased from 54 per cent to 8 per cent for cigarettes, 17 per cent to 1 per cent for bidis, and 59 per cent to 11 per cent for smokeless tobacco products, on average, from 2017 (pre-GST) to 2021 (post-GST), Rijo John, health economist and adjunct professor, Rajagiri College of Social Sciences, Kochi said.

Globally countries in the world have high excise taxes along with GST or sales tax and are also revised on a continuous basis. Yet, the excise duty on tobacco in India continues to remain extremely low, John argued.

"Tobacco industry in India has been virtually enjoying an extended tax-free season on tobacco products over the past four years since the introduction of the GST as there hasn't been any major increase in tobacco taxation during this time. This has made many tobacco products more affordable. It could turn out to be highly detrimental to public health and potentially reverse some of the tobacco use prevalence reduction India achieved during 2010 2017," John said.

John appealed that the Union budget must take a considerate view of public health and raise tobacco taxes significantly especially on bidis.

The total tax burden (taxes as a percentage of the final tax-inclusive retail price) is only about 52.7 per cent for cigarettes, 22 per cent for bidis and 63.8 per cent for smokeless tobacco. This is much lower than the World Health Organization (WHO) recommended tax burden of at least 75 per cent of the retail price for all tobacco products, John said.