Sin Tax

About Sin Tax

What is Sin Tax

A sin tax is imposed on goods and services, which are perceived as harmful to society. Examples of products on which sin tax is imposed are: tobacco, gambling ventures, alcohol, cigarettes, etc.

What is the main purpose of sin tax?

Sin taxes seek to prevent people from participating in socially harmful activities. The aim is to reduce or eliminate the consumption of harmful products by making them more expensive to obtain. They also provide a source of revenue for governments. In March 2019, a committee headed by Arvind Subramanian recommended that in a unified GST regime, certain goods should attract a ‘Sin’ tax of 40 per cent.

Sin tax a global trend

In 1776, Adam Smith - Father of Economics - wrote that taxes on cigarettes, rum, and sugar are appropriate.

Countries such as the UK, Sweden and Canada impose Sin Taxes on a series of products and services, from tobacco and alcohol to lotteries, gambling and fuel, which chip in with sizeable revenues. Mexico imposed a Soda Tax in 2013 and the UK is now debating a Sugar Tax, to tackle obesity, on all foods and drinks with high concentrations of the sweetener.

Why is it necessary?

Sin Taxes are intended to serve two objectives.

1. To make the undesirable goods so expensive that rational consumers would be forced to give up the habit

2. Make companies producing these products pay higher tax, which can be used to fund other welfare programmes. Eg: Sweden uses the excess tax collected from gambling to help people with gambling problems

Excessive consumption of tobacco, alcohol or calories heightens health risks such as heart attack, cancer and obesity. Studies have shown that sin taxes have been successful in reducing consumption of harmful products and states have gained sufficient capital out of the excess tax.

Criticisms against sin tax

Critics argue that sin taxes can give the state unnecessary moral authority to dictate what citizens should and should not be doing. They are also of the opinion that while sin taxes may reduce purchases of a product for a few years, consumers who are really addicted to the habit may persist buying.

Sin taxes are often termed regressive as they discriminate against the lower classes. The poor end up paying a greater share of their income as tax.

Latest Updates on Sin Tax

ITC hits Rs 500: Jefferies says 'Buy' on no tobacco tax rejig in Budget

ITC share price target: ITC stock hits Rs 500-mark for the first time. Jefferies upgrades stock to 'Buy', Macquarie initiates with 'Outperform'

Updated On: 24 Jul 2024 | 10:16 AM IST

Industry body seeks exemption for fizzy fruit-based drinks from sin tax

The IBA is also holding discussions with the FSSAI, to differentiate the standards for sugar-free drinks and sugary beverages

Updated On: 11 Jul 2023 | 7:01 PM IST

Highest 28% GST on luxury, sin goods to continue: Revenue Secretary

On the industry demand for bringing petroleum products under GST net, Tarun Bajaj said since fuel constitutes a larger part of their revenues, both the Centre and states have some apprehension

Updated On: 04 Jul 2022 | 3:15 PM IST

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What is sin tax? What is it imposed on?

Govts earn revenue by charging taxes. But, it also imposes a special tax to wean people off bad habits. It is called sin tax. Govts impose sin tax on alcohol and tobacco products

Updated On: 14 Feb 2022 | 8:45 AM IST

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Sin Tax

What is Sin Tax

Latest Updates on Sin Tax

ITC hits Rs 500: Jefferies says 'Buy' on no tobacco tax rejig in Budget

Industry body seeks exemption for fizzy fruit-based drinks from sin tax

Highest 28% GST on luxury, sin goods to continue: Revenue Secretary

What is sin tax? What is it imposed on?

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