Public health groups along with doctors and economists are urging the GST Council to increase compensation cess on all tobacco products that can provide additional tax revenue of Rs. 49,740 crores. This additional revenue could significantly contribute to the increased need for compensation by different states during the pandemic and to disburse the dues already owed by the Centre. They all are appealing to the GST Council to, as an extra-ordinary measure, to apply the compensation cess on bidis and also increase the existing compensation cess applied on cigarettes and smokeless tobacco products during the upcoming meeting of the GST council.
COVID-19 appears to be one of the biggest economic shockers India may have ever experienced. The GST revenue receipts of both central and states governments have been severely affected due to the COVID-19 pandemic and, as a result, the central government has not been able to distribute the compensation cess dues to different state governments as guaranteed under the GST. In addition, the Government of India has announced various fiscal and economic stimulus measures to boost the economy and compensate people affected from the negative economic shock from the pandemic Applying compensation cess on bidis and raising the existing compensation cess on cigarettes and smokeless tobacco products can be a very effective policy measures to address the immediate need to raise the compensation cess revenue by the central government. The group suggests that such measures can be more attractive solution than market borrowing to compensate state governments for their respective GST revenue shortfalls during the pandemic time. They are also easy to integrate into the existing tobacco tax system. In addition, it will be a win-win for revenue and public health by reducing tobacco use and related diseases as well as COVID related co morbidities.
According to Dr. Rijo John, Economist & Health Policy Analyst – “Unprecedented financial resources will be needed for the country to recover from the economic shock COVID-19 has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted, compensation cess on tobacco could be a win-win as it will discourage tobacco consumption while bringing in substantial revenue for the government. A Rs. 1 compensation cess per stick of bidis and significant cess increases on cigarettes and smokeless tobacco products are expected to generate additional tax revenue to the tune of Rs. 50,000 crores.’’
“Increasing compensation cess on all tobacco products, including bidis, is a winning proposition for Government as it will provide the Govt. much needed additional tax revenue by motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use” – Advocate Ajoy Hazarika, Secretary, Consumers’ Legal Protection Forum, Assam.
“There is ample evidence about bidis being the killer and not the pleasure of the poor. These should be made unaffordable for the poor to save them from a lifetime of misery and suffering,” Dr. A.C.Kataki, Director, Dr. B. Borooah Cancer Institute, Guwahati
