INCREASE COMPENSATION CESS ON TOBACCO PRODUCTS

INCREASE COMPENSATION CESS ON TOBACCO PRODUCTS FOR ADDITIONAL REVENUE - DOCTORS, ECONOMISTS, PUBLIC HEALTH ACTIVISTS URGE GST COUNCIL

Consumer and public health groups along with doctors and economists are urging the Members of the GST Council to further increase compensation cess on all tobacco products, while retaining tobacco products at the highest demerit goods category at 28 percent under GST. Increasing compensation cess on tobacco products can help the Government garner  additional revenue of 190 billion to make up the deficit short fall in GST collection.

Taxing tobacco products at 28% rate and additional compensation cess will not only bring in additional revenue but also reduce tobacco consumption, they explained in their letters to the finance minister.  The additional revenues collected will support the deficit shortfall and can also be used to support Govt’s schemes like Ayushman Bharat.

The civil society, doctors and economist are urging the members of the GST council:

§  To increase the compensation cess uniformly on all cigarettes to Rs. 5463 per 1000 sticks on cigarettes irrespective of their size. Such increase could potentially increase the GST revenue from cigarettes by about Rs.150 billion while targeting a 10% reduction in consumption.

§  Compensation cess on all smokeless tobacco products should also be increased to 125%, on average, from the current 104%. This could potentially increase the GST revenue by about Rs. 3 billion while targeting a 10% reduction in consumption.

§  Considering the extremely low price of bidis which costs only about 65 paisa per stick, the compensation cess can be applied on bidis at the rate of 30 paisa per stick which is expected to result in a retail price of minimum Re. 1 per stick. This could potentially increase the tax revenue from bidis by about 37 billion while targeting a 52% reduction in consumption. 

“It is critical that tobacco products are retained in the 28% slab and compensation cess is increased on all of them. Increase in tobacco taxation will be beneficial for our country’s economy as well as to address public health concerns related to tobacco thus making it a win-win situation” K.Ramachandran, Managing Trustee,  Consumers Association of India.

Most of the GST compensation cess on cigarettes is specific in nature and had not been revised for the past two years. This has significantly eroded the real value of tax and has made cigarettes, bidis and smokeless tobacco products highly affordable, threatening to undermine the progress in reduction of prevalence of tobacco consumption in India.

According to Ashim Sanyal COO, Consumer VOICE,New Delhi" The GST Council must consider the fact that there has been no increase in taxes imposed on tobacco  for the last two years which has made cigarettes, bidis and smokeless tobacco products  more affordable and accessible, specially to the youth. The council should consider increasing the specific compensation cess uniformly on all cigarettes and smokeless tobacco products.  Given the extremely low price of bidis, it should also consider levying a compensation cess on bidis. This move will help the government to get the much needed revenue and also support its efforts to check tobacco consumption".

                                                                     

The present GST rates combined with the compensation cess for all tobacco products is far below the recommended level of tax burden (taxes as a percentage of final tax inclusive of retail price) of 75% by the WHO (World Health Organization). The total effective tax burden currently for tobacco products in India is only about 49% for cigarettes, 22% for bidis and 60% for smokeless tobacco - this data reveals a far different picture from what the tobacco industry is portraying in their demand for lower taxes. As the taxes have not been increased on any of the tobacco products for more than two years, all tobacco products have become more affordable during this time. Hence, increasing taxes on tobacco products are warranted not only for regulating its consumption, but also for raising more tax revenue.

Dr Rijo John, Economist & Health Policy Analyst –“India has witnessed decline in tobacco prevalence mainly due to the relatively higher taxation. However, it has been nearly two years since the tax on tobacco has changed under the GST, making tobacco products more affordable. It is high time the GST council raises compensation cess on these to sustain the prevalence reduction, as witnessed between the two rounds of global adult tobacco surveys. Concerns of increased illegal cigarette trade on account of tax increase are unsupported by the evidence both from within and outside India. A critical step to check this has been taken by the Government of India by ratification of the WHO protocol to eliminate illicit trade in tobacco products.”

“Government should levy uniform and high taxes on all categories of cigarettes, bidis and smokeless tobacco. It should levy cess on bidis just as it does on other tobacco products. There is ample evidence about bidis being the killer and not the pleasure of the poor. It should be made unaffordable for the poor to save them from a lifetime of misery and suffering”, Doctor K.Kannan quote.

Tobacco kills more than 1.3 million people each year in India (home to the second greatest number of smokers in the world behind China). Additionally, tens of millions use deadly smokeless tobacco products. In fact, approximately 130 million people of age 15 and older in India currently smoke and roughly half of all adults are exposed to second-hand smoke at home. The total direct and indirect cost of diseases attributable to tobacco use was a staggering Rupees 1.04 lakh crore ($17 billion) in 2011 or 1.16% of India’s GDP.

Healthcare Concerns of Consumers

LATEST TINY TARGETS STUDY REVEALS SCHOOLS IN TAMIL NADU

LATEST TINY TARGETS STUDY REVEALS SCHOOLS IN TAMIL NADU EXPOSED TO ADVERTISEMENT AND PROMOTION OF TOBACCO PRODUCTS

Chennai: Consumers Association of India , Chennai along with Consumer Voice, New Delhi organised a stakeholders’ workshop to release the findings of a new report that revealed tobacco companies are systematically targeting children as young as eight year olds  in Tamil Nadu  through their advertisements near schools premises.

The study was undertaken by Consumer Voice and its partner organisations in 20 cities across 6 states of India. Despite the prohibition on sales of tobacco products near educational institutions, numerous shops/vendors/points of sale sell & advertise tobacco products around schools. 

To gather additional evidence regarding tobacco products being sold around educational institutions in violation of the law, Consumer Voice and Consumers Association of India , Chennai undertook a study in 3 cities across the state of Tamil Nadu (Chennai, Coimbatore and Pudukkottai). This study titled, “Big Tobacco Tiny Targets” was conducted at 34 schools.

National Key Study findings

1.      Nearly half of the vendors around schools sell tobacco products.  (Investigators observed 225 points of sale selling tobacco products out of the 487 surveyed around schools.  Street vendors were the most common form of vendors at 56.6% of the 225 tobacco points of sale observed.)

2.      Multinational tobacco companies sell tobacco products around schools

3.      Vendors sell cigarettes and bidis via single sticks, making these products cheap and accessible to children and youth.  (Investigators observed single stick sales in 90.9% of the 225 tobacco points of sale observed.)

Tamil Nadu  State -Key Study findings

1.      Out of target schools sample size of 34, 68 observations were recorded where we found 34 violations.  Majority were found to be street vendors, unlike other States where mobile vendors were prominent

2.      Mandatory warning display board was found only at only 4 out of 34 points of sale.

3.      Sale of loose cigarettes is rampant - 88% which frustrate purpose of pictorial warning at package.

4.      88 % Tobacco vendors were also found Selling candy, chips etc. the products meant for and to attract children/youth to tobacco shops.

5.      Tobacco products are displayed openly amounting to advertisements were found at several point of sale.

6.      Almost all Cigarette brands found during the survey were from ITC.

This new report is not the first time the tobacco industry has been found targeting children, nor is it unique to India. However, the data is alarming because it documents a very systematic and widespread pattern of  activity to get young people addicted to tobacco.

The Ministry of Health & Family Welfare issued an advisory letter, recommending the licensing of tobacco vendors through municipal authorities.  The advisory observes that it would be appropriate to include provision that the shops permitted to sell tobacco products cannot sell non-tobacco products such as toffees, candies, chips, biscuits, soft drinks, among others, which are meant for the non-user – particularly children.

Representative CONSUMER VOICE - “We have seen the industry use this tactic time and time again and, it is our duty and responsibility to stand up to the industry and protect our children. The systematic targeting of our nation’s schools is endangering the lives of our youngest citizens and their right to healthy and safe schools”.

The Global Adult Tobacco Survey, India (2016-17), by Ministry of Health and Family Welfare, Government of India shows that nearly 28.6% of adults use tobacco.  The Global Youth Tobacco Survey, India indicates that 14.6% of 13 –15 year old students in India use tobacco. As many as 11% of all male students surveyed were found to be users of smoking or smokeless tobacco, while 6% of female students used smokeless tobacco and 3.7% smoked tobacco.

Smt.Nirmala Desikan  The recent Global Adult Tobacco Survey 2 (GATS 2) released by Ministry of Health and Family Welfare (MoHFW) shows 20 % percent of adults in Tamil Nadu consume tobacco in some form or the other”. Alarmingly a whopping 81.1 per cent of smokers had bought cigarettes at stores, indicating easy availability in the cities surveyed. We would like COTPA to be enforced so that we are able to protect the health of our younger generation.

Representative ministry/MLA: Nearly 37%  children in India get  initiated into smoking before the age of 10 and each day 5500 children begin tobacco use and consequently may become addicted. The government will do everything in their power to ensure that youth will not be targeted through advertising.

Doctor: Tobacco is one of the biggest public health threats the world has ever faced. Tobacco-related diseases account for an estimated 6 million deaths globally and nearly 10 lakh people in India each year. Addiction to tobacco use starts early. Within days of smoking or using smokeless tobacco, a young user begins to show signs of addiction.

Tobacco control activist: We need to be proactive in saving our future generation from tobacco by strict enforcement of COTPA as our study found  out of target schools sample size of 34, 68 observations were recorded where we found 34 violations.

 Representative from Education Department - We will ensure that we take strict action as per the law against companies found using misleading and predatory marketing practices to glamourise and normalise tobacco use among youth. A survey shows 88% of displays were beside candy, sweets and toys – items marketed to children.

Recommendations:

1. Urgent action required from the Government agencies to stop children being targeted through  aggressive advertising & selling tobacco products around schools.

2.  Stricter enforcement of COTPA rules prohibiting the selling and advertising of tobacco products within 100 yards of educational institutions.

3. Regulating tobacco vendors to aid COTPA enforcement. COTPA compliance should be a condition of all vendor licenses.