Hike in excise duty on tobacco products lauded

As the central government on Monday announced an increase in excise duty on tobacco products by 10-15 percent in the 2016-17 general budget to discourage increasing consumption, people from various strata lauded the decision.

Taxes should have been more stringent for better regulation of the tobacco product consumption, they said.

They even urged the government to hike taxes on 'bidis' as these continued to remain the most preferred tobacco product for smoking in rural India.

"The effective increase in total excise on cigarettes has only been 10 percent. It is disappointing when compared with the 15-25 percent increase in the last year's budget and 11-72 percent increase in the year before," said Rijo John, assistant professor of Economics at the Indian Institute of Technology-Jodhpur.

Talking about no increase in taxation on 'bidis', John said: "Bidis do not get adequate attention from a fiscal collection point of view and are ignored in every budget with policy-makers claiming that increasing taxes on 'bidis' will affect the livelihood of millions who depend on the trade."

Bhavna Mukhopadhyay, chief executive of Voluntary Health Association of India, said: "India is one of the very few countries where cigarettes have become more affordable over the past few years. Moreover, by not effecting any increases in bidi taxes, the government is forgoing a wonderful opportunity to help the cause of public health in the country."

According to a recent government decision, specific rates of excise duty on cigars and cheroots, cigarillos, cigarettes of tobacco substitute and other forms of tobacco substitutes are being increased by about 10 percent.

Excise duty on gutkha (chewing tobacco, including filter khaini) and zarda (scented tobacco) is being increased from 70 percent to 81 percent, excise duty on unprocessed tobacco is being increased from 55 percent to 64 percent, and excise duty on pan masala increased from 16 percent to 19 percent.

Pankaj Chaturvedi of Tata Memorial Hospital said, "It is sad that the government continues to subsidise bidis which are responsible for nearly six lakh deaths every year."

However, the Tobacco Institute of India condemned the government decision to hike taxation on tobacco products and called it extremely disappointing.

"It is extremely disappointing that the 2016-17 general budget, on the back of four successive years of steep duty increases, has once again raised the excise duty on cigarettes," said institute director Syed Mahmood Ahmad.

Calling the government's decision discriminatory against cigarettes, he said it was a matter of deep concern, particularly due to the fact that 'bidis', the most popular tobacco product in rural India, have once again been spared with no increase in tax after 2012-13.

As per their estimates, nearly 70 percent of tobacco consumption in the country is largely in the unorganised sector which does not pay any tax either due to exemptions or evasion.

"The increase in excise duty on cigarettes, at a per unit level, has gone up cumulatively by 98 percent, which is exerting severe pressure on the legal cigarette industry even as illegal trade grows unabated," said Ahmad in a statement.

He said the high taxation is also a major blow to the livelihood of lakhs of tobacco farmers, who have been facing unprecedented hardships due to a continuous drop in demand for their produce due to the shrinking domestic legal cigarette industry.