India: Budget 2016: Health Ministry Seeks Heavier Taxation on Tobacco Products

Source from:  Indiatodayin 02/26/2016

The Union health ministry wants to make tobacco products unaffordable as the current taxes being charged on the products have not managed to push the dangerous substance out of the reach of common man.

Seeking heavier taxation in the upcoming budget, the health ministry has cited a recent World Health Organization (WHO) study on the evaluation of prices of tobacco products. The study showed that the current excise and Value Added Tax (VAT) rates are not sufficient to make tobacco products unaffordable.

"The WHO study recommended that not only the tax on all types of tobacco products should be increased substantially but the tobacco tax regime should also be broadened to include manufacturing of tobacco products by the informal sector under the tax net," stated a letter written by BP Sharma, secretary, Union Health Ministry.

Health ministry has said that increasing tobacco taxes, with a view on increasing inflation adjusted prices of tobacco products, is particularly important for protecting young people from initiating or continuing tobacco consumption.

"The recommendations of this study would help your department in making a strong case for increasing excise duty on all tobacco products. These initiatives will go a long way in discouraging tobacco use and protecting the youth and other vulnerable populations in the country from getting addicted to tobacco, thereby improving health of the citizens as well as reducing public health costs," said the health ministry letter.

Price of addiction

Non Communicable Diseases (NCD) are the leading cause of death, globally as well in India, accounting for around 5.2 million deaths in India alone. More than 80 per cent of all NCD related deaths are attributed to four clusters of diseases: Cardiovascular diseases, cancers, chronic respiratory diseases and diabetes with tobacco use being the common risk factor for all of them.

However, revenue earned from cigarettes has increased over the past three years from Rs 14,853.73 crore in 2012-13 to Rs 16,675.77 crore 2014-15.
Cigarettes in India are taxed at very low rates. WHO recommends that countries impose tobacco excise taxes that amount to at least 70 per cent, or more, of the retail price to achieve the dual objective of reducing tobacco use and increasing government revenue.

In 2014, the average tax incidence for manufactured cigarettes was only 53 per cent of the final retail price which was only marginally increased in the 2015-2016 budget.

India's cigarette excise tax rate is very low compared to other middle-income countries with effective tobacco tax systems.

India is the second largest consumer and third largest producer of tobacco products.

Further, as per the estimates of the Global Adult Tobacco Survey India 2010, 35 per cent of the population in the age group of 15 years and above, consume tobacco in some form or other.

The estimated number of tobacco users in India currently stands at 27.5 million. Enditem