Wednesday, Nov 30, 2022

A time to tax

India — the world leader in deadly cancers — must show political will, adopt high tobacco taxes which improve national health.

tobacco, tobacco india, tobacco tax, cancer, tobacco cancer, GST, tobacco control, no smoking, smoking kills, sustainable development goals, throat cancer, smoking cancer, chronic lung diseases, tobacco revenue, indian express column, column India faces a wide gap between its existing health policies and what is needed.

As nations from around the world gather in Delhi to advance the global commitment to tobacco control, this is an opportune moment for the Indian government to reflect on what it can do to significantly advance its own health and sustainable development goals (SDGs).

Effective policies can make a tremendous impact. India’s Goods and Services Tax (GST) legislation, coming into force on April 1, 2017, offers the government an opportunity to use taxation policy for public health and development; it can help India significantly reduce the tobacco epidemic while moving toward its SDGs.

India faces a wide gap between its existing health policies and what is needed. The gap is most noticeable in noncommunicable diseases (NCDs), which now account for the majority of early deaths in the country. Releasing the World Health Organisation’s report on NCDs, Assistant Director-General Oleg Chestnov stated, “If countries continue on this trajectory, there is no way they will all meet the 2030 Sustainable Development Goals (SDG) target of reducing, by one-third, premature deaths from NCDs.”

Tobacco use is a primary risk factor for all the main NCDs — heart disease, strokes, diabetes, cancer and chronic lung diseases. So, one obvious solution to enable India to reduce NCDs lies in a comprehensive implementation of tobacco control measures, especially tobacco taxation.

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Tobacco taxes are a proven strategy to deter purchase of tobacco products. In India, these taxes are simply too low — and woefully inadequate for products like bidis. High tobacco taxes are the single most cost-effective and evidence-based strategy for persuading tobacco users to quit and to deter youth from initiating use.

Adding to India’s burden is that a high level of consumption of smokeless tobacco has made India the world leader in head, neck and throat cancers. In India, smokeless tobacco products, bidis and cigarettes of different lengths are taxed at different rates — even though they all cause disease and premature death. The GST bill offers an opportunity to define cigarettes, bidis and other tobacco products as “demerit goods” — an economics term for products with no health value — and to treat all tobacco as equally dangerous, deserving the same high tax rate. What is needed is political will.

Until recently, the Philippines faced a similar challenge to India’s: High levels of tobacco use, a politically influential tobacco industry, a complex tobacco tax structure which enabled the industry to keep prices of products low. These tactics encouraged tobacco users to switch to cheaper products, rather than quit. Having analysed tobacco taxes, the Philippines finance ministry became a strong advocate.


In 2012, honoring election pledges to increase access to health care, the Philippines government passed its “Sin Tax Reform Law.”

Recognising that all tobacco products cause harm, they simplified the former complex tobacco tax structure and increased rates by as much as 341 per cent for low-priced brands in the first year. The new law also earmarked incremental revenues as a sustainable source of financing for the country’s universal health care programme.

In just three years, the Sin Tax Law generated an additional US$ 3.9 billion in revenues, which allowed the government to subsidise health insurance premiums of indigent families, from 5.2 million in 2012 to 15.3 million families in 2015. Some money is also available to help farmers move to an alternative livelihood.


In India, a “health cess” levy on tobacco products was introduced over a decade ago; some revenue generated has been used to fund national health missions. The introduction of higher tax levies in India under the GST regime could extend that funding. In India, the tobacco industry is using customary tactics to oppose tobacco tax increases, including arguments that such reforms will harm the poor, stimulate illicit trade and crime, cause job losses and reduce government revenue.

History and evidence, however, show these claims are flawed. Thailand, under its Health Promotion Foundation Act of 2001, established a small two per cent surcharge on tobacco and alcohol products, earmarking the revenue to fund ThaiHealth, a state-run health promotion foundation. In 2014, ThaiHealth garnered the equivalent of $125 million from the surcharge, a figure consistent since the tax’s inception in 2001.

The GST Council can take comfort from these examples and from the fact that higher tobacco taxes help reduce tobacco’s negative economic and health impacts. As per a study commissioned by the ministry of health and family welfare, tobacco-related diseases cost India Rs 1,04,500 crore ($ 22.4 billion) in 2011 — 12 per cent more than the combined annual central and state health expenditures that year.

With such a powerful tool for change at their disposal, we welcome the GST Council’s decision to assign the highest demerit rate of 28 per cent GST to all tobacco products. We also welcome the decision to levy an additional cess on tobacco products on top of this. Going forward, we encourage the central government to raise excise on all tobacco products, including bidis, and to strive for a uniform excise tax system, so that prices are effectively increased. These changes would help slow India’s tobacco epidemic and significantly improve health.

First published on: 12-11-2016 at 12:03:20 am
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