The GoM is proposing to decrease GST rates on essential items and increase taxes on luxury goods, particularly tobacco products, to address the public health crisis in India, which is causing health issues and increasing healthcare costs. High tobacco taxation could reduce consumption and generate revenue for public welfare programs.
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The recent proposals by the Group of Ministers (GoM) to reduce GST rates on essential items such as bicycles and exercise books and raising taxes on luxury goods, particularly tobacco products.
Tobacco use is a major public health concern, killing nearly 1.3 million people each year and causing severe health problems for millions.
It reduces productivity and increases healthcare costs. The situation highlights the critical need for effective tobacco control interventions, especially taxation.
Higher tax rates raise the prices of the product, which discourages new users, and encourages current smokers to quit. The effect is stronger among lower-income groups and young people, who are more price-sensitive.
Taxes on tobacco products help to reduce overall consumption and promote better public health by making them more expensive.
Higher taxes generate substantial revenue for the government, which can then be reinvested in public welfare programs like healthcare, education, and anti-smoking campaigns.
Different tax rates for different tobacco products allow consumers to switch to less expensive alternatives. For example, despite their widespread consumption, bidis are taxed minimally.
Despite periodic tax increases, tobacco products remain reasonably priced due to rising incomes and stagnant tax rates. To address this, taxes must be adjusted annually to reflect inflation and income growth.
Bidis are taxed at lower rates than cigarettes, which encourages their use, particularly among low-income groups. A uniform tax structure is required to address this disparity.
Applying the same tax rate to all tobacco products, regardless of brand or size, would eliminate substitution while ensuring consistency.
Taxes should be adjusted on a regular basis to reflect inflation and rising incomes. Specific excise taxes, which charge a set amount per unit of tobacco, are more effective than ad valorem taxes.
Bidis should be taxed the same as other tobacco products. This would reduce their affordability and consumption, thereby improving public health.
Smokeless tobacco products should be included in the unified tax structure, and their taxes should be increased on a regular basis to reduce consumption.
The GST Council proposed reforms to balance fiscal needs with public health goals by raising tobacco taxes to reduce tobacco consumption, generate revenue for public welfare, and promote a healthier, more equitable society.
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