Tax cut on tobacco products draws flak from NGOs, health department

Slashing of value added tax (VAT) on tobacco products, pan masalas and cigarettes has delivered a massive blow to the efforts of voluntary organisations and the health department to reduce tobacco consumption in the state.

The tax division of the finance department recently issued a notification that VAT on tobacco products and pan masalas would be slashed by 20% and 30% respectively. However, the most surprising part of this order was that the department claimed the decision was made in ‘public interest.’

Rajasthan earlier had the highest tax rate on tobacco products in the country at 65%, which now has been slashed to 45% and 35% on pan masala, while the tax would remain 65% for bidis. Howeverm the drastic reduction in tax was seen in cigarettes, where instead of a fixed percentage, tax will be from Rs 438 to Rs 1,700 per 1,000 sticks depending on the length of the cigarette. That adds up to Rs 0.43 to Rs 1.70 per cigarette stick.

Satyen Chaturvedi, executive director, Rajasthan Voluntary Health Association, an NGO working in the field of health, said, “By slashing the tax on tobacco products, cigarettes and pan masalas, the government has thwarted the efforts of people and organisations working towards curbing the use of tobacco. This decision would badly affect the health of people, as consumption of tobacco, both chewing and smoking, along with pan masalas will increase.”

He said the state government was earlier generating Rs 750 crore from the sale of tobacco products in the form of 65% tax. Also, the higher tax rate discouraged new users from consuming tobacco. In response to a question raised by Congress MLA Ramesh Meena Chaturvedi during the zero hour of the budget session in the state assembly on March 3, 2015, the government said the expense on treating tobacco-related illnesses runs up to about Rs 1,160 crore. The government also accepted that an increase in tax on tobacco and related products led to a decline in the use of these products.

“The reduction in tax on tobacco and its products shows the government’s thinking towards common man,” Chaturvedi said.

Indian Asthma Care Society secretary Dharamveer Katewa said, “This has been a very upsetting decision. Rajasthan was known for imposing maximum tax on tobacco products in the entire country and the state government has won two awards from World Health Organisation in 2012-13 and 2013-14 for doing commendable work in curbing tobacco consumption.” He said the NGO would now go to court in this regard, and it has sought an appointment with the governor of the state and the Prime Minister to discuss this matter and to revise the tax rate back to 65%.

“We are running a signature campaign protesting this move in various parts of the city and we would continue it till the government withdraws its decision,” Katewa said.

Leading asthma expert Dr Virendra Singh, appealing the government to withdraw its decision, said, “Whenever tobacco becomes cheaper, it is the children that start consuming it.” He said over 100 studies clearly demonstrate that a significant increase in tobacco taxes encourages current tobacco users to stop using, prevents potential users from taking up the bad habit and also reduces consumption.

He said, “Increasing the price of tobacco through higher taxes is the single most effective way to encourage tobacco users to quit and prevent children from starting.”

Health minister Rajendra Rathore said, “The taxation department might have reduced the taxes on tobacco but the department’s efforts to curb the consumption of tobacco would continue.”

It is to be mentioned that the health department had issued a directive to keep all tobacco-selling kiosks closed on the last day of each month and its efforts were quite successful. In another initiative, government employees and officers had to give an affidavit stating that they do not consume tobacco in any form. Also, in a first, the Rajasthan government in November 2013 had issued a circular making it compulsory for candidates seeking government jobs to give an undertaking that they would not smoke or chew tobacco while in the government service.