Doctors and Association of Private Hospitals of India urge Government to tax bidis at 28%

Bengaluru, 30 May, 2017: Taxing bidis below 28% under GST will cause a sharp increase in bidi consumption and further aggravate the public health and economic burden caused by bidi use in India. This chilling fact has been brought to light through economic data and modeling, thereby appeals to the Government to act boldly at the forthcoming 3rd June GST Council meeting to avoid such an adverse health outcome.

The data which simulates economic scenarios depending on how bidis would eventually be taxed in the impending GST regime, points to a dramatic increase in bidi use if public health concerns are ignored at the next crucial meeting of the GST council and bidis are taxed at a rate lower than 28%.

The scenarios, modelled by professional economists, draw a direct linkage between the level of taxation of bidis and the extent of consumption. The most direct and effective method for reducing bidi consumption is to increase its price through tax increases.  Given this overarching principle, the data scenario infers that if the Government settles for an 18% GST rate, there will actually be an upswing in consumption by 1.25%, considered to be massive in volume terms while if a 28% slab is slotted for bidis, consumption will actually dip by 0.77% which is also a substantial swing. Interestingly, if excise burden is also applied over and top of the GST incidence, then consumption further dips by a bit over 1 full percentage point, a huge behavioral change, given the bidi market in India runs into billions.

According to Dr Rijo John, economist & health policy analyst, “The bidi consumption in India is price elastic and hence responds negatively to changes in prices. This is why a change in tax slabs could make a significant change in consumption and hence all the more reason why the Government and the GST Council should not let this opportunity go a begging to leverage the instrument of taxation to discourage bidi consumption- a stated public policy goal. Moreover, a 28% GST applied on bidis would only barely surpass the current tax burden on bidis in India. Hence, settling for a GST rate less than 28% on bidis would result in a public health disaster in India as bidis are the most commonly used form of tobacco in the country.’’

The startling issue of this the public health failure has been brought to the fore by none other than the bidi workers themselves. In a letter to the Union Finance Minister, bidi workers from the states of Tamil Nadu and Uttar Pradesh have blown the cover of bidi owners, alleging that these industrialists and business people have prevented adequate taxation of bidis in the name of hapless bidi workers who continue to work and live in abysmal conditions facing prolonged exposure to tobacco.  These workers are also at high risk for life threatening diseases such as tuberculosis and lung cancer among others.

In a firstof sorts, these bidi workers have pressed the Government to intervene andalleviate working conditions and eventually seek out alternative livelihoodoptions.

‘’Weourselves are the victims of the bidi industry owners, who take advantage of usand manipulate the weak enforcement and regulatory system in the bidi industryto make our lives more miserable.  We donot want you to consider their request for lower taxation, benefits orsubsidies that they are seeking in our name. (Referring to bidiowners)”-Thangam, 45 years, Tirunelveli district, Tamil Nadu has been rollingbidis since she was 10 years old.

And theplight that bidi workers and smokers face, are validated in force by themedical community. Over 1 million deaths in India every year are tobaccorelated and almost two thirds of tobacco consumers in India actually consumebidis leading to debilitating diseases and even death.

Of relevancehere is a 2008 report published by the Union Ministry of Health and FamilyWelfare. Titled  ‘Bidi Smoking and PublicHealth’, it reviewed 15 studies conducted in India and concluded that bidismoking poses a very high risk for cancer and in many cases bidi smokers were atgreater risk for oral cancer, stomach cancer and lung cancer than non-smokers.

This hassensitized the medical fraternity to the absolute imperative for highertaxation on bidis. ‘’As physicians, we witness this “pleasure” causing causedcancers as well as pulmonary and cardiovascular diseases and killing hundredsof “poor” people every day. All these studies convey the clear message thatbidis are deadly and should be made unaffordable for the poor.’’ Said, Dr. AjaiKumar, President of APHI and Chairman HCG cancer Centres.

 “Considering the staggering health andeconomic impact of bidis, which is used by the majority of India’s 275 milliontobacco users, not categorizing bidis in the highest GST rate slab will onlyaccelerate the death and diseases caused by tobacco and work against the goalsstated in Government’s recently announced national health policy”.

Given thisbackdrop, it’s disappointing that some states are still holding on to theirstated position for lower taxation on bidis, clearly prioritizing commercialconsiderations over health concerns.

Taxing bidisat the highest GST rate will not only widen the tax base and also increaserevenue collections but also disincentives the consumption of cheaper bidis.

Theforthcoming 3rd June GST Council meeting is hence a historic fiscal opportunitythe Government should utilize to prioritize it’s stated public healthintentions- one of the fundamental pillars of the rate fitment exercise.

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