Public health groups have urged the GST council to put a special COVID19 cess on tobacco products, that could cover 29% of the stimulus package
Public health groups have urged the GST Council to consider a special COVID -19 cess on tobacco products to raise additional tax revenue needed to contribute to funding the COVID-19 stimulus package. They are appealing for a COVID cess on cigarettes, bidis and smokeless tobacco products that can provide revenue of Rs. 49,740 crores (497.4 billion) which could cover about 29% of the stimulus package.
Imposing COVID cess on all tobacco products will not only help raise the much needed revenue to fund the stimulus, it will also prevent the further spread of the virus especially amongst vulnerable populations by making tobacco products unaffordable and forcing them to quit. . Based on studies conducted in several countries, smokers and smokeless tobacco users may be at greater risk for severe illness when confronted with COVID-19 since it attacks the lungs and behaviors that weaken the lungs put individuals at greater risk.
COVID-19 appears to be one of the biggest economic shockers India may have ever experienced. Immense financial resources will be needed for the government to repair the damage caused by this pandemic. The Government of India has announced several stimulus measures (including a mega Rs. 20 lakh crore package) to revive the economy and to make India self-reliant. Among other programs, the Government has also announced in March, a Rs. 1.7 trillion ($22.6 billion) economic stimulus package providing direct cash transfers and food security measures to relieve millions of poor Indians hit by the nationwide lockdown over COVID-19.
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 has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted., special COVID cess on tobacco, could be a win-win as it will discourage tobacco consumption and reduce COVID related risks while bringing in substantial revenue for the government. A Rs. 1 COVID cess per stick of bidis and significant tax increases on cigarettes and smokeless tobacco products are expected to generate additional tax revenue to the tune of Rs. 50,000 crores.’’
Proposed COVID Cess on tobacco products and its Impact
| Bidis | Cigarettes | Smokeless tobacco | |
| Proposed COVID-19 cess | Rs. 1 per stick | Rs. 5 per stick | 52% |
| Estimated additional cess revenue (Rs.) | 233 billion | 250 billion | 13.5 billion |
| New total tax burden | 67% | 65% | 70% |
| Estimated percentage decline in consumption | 35% | 17% | 10% |
| Estimated percentage decline in prevalence | 18% | 10% | 5% |
| Estimated decline in attributable deaths | 9.1 million | 3.4 million | 7.2 million |
Increasing taxes on all tobacco products will not only reduce their affordability and therefore consumption, but also to limit the increasing health and fatal damages caused by tobacco. Tobacco smoking is a known risk factor for many respiratory infections and increases the severity of respiratory diseases. Early evidence from China and Italy has found that patients with underlying health conditions and risk factors, including smoking and diseases linked to smoking, may be at greater risk for severe outcomes or death from COVID-19.
“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. Imposing cess on all tobacco products, including bidis, is a winning proposition for Government as it will provide the much needed additional tax revenue for COVID 19 stimulus package for providing relief to the people of the country while motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use,” Dr Harit Chaturvedi, Chairman of Max Institute of Cancer Care.
