Imagine this - What if your child's school notebooks could cost less, or health and life insurance premiums became more affordable? Wouldn't that bring relief to every household? Now, here’s the catch—what if achieving this required us to pay a little more for harmful products like cigarettes, bidis, and gutkha? Isn’t that a fair trade for a healthier and more secure future for our families?
This is the essence of the recent proposal from the Group of Ministers (GoM), which is reportedly considering introducing a 'sin tax' on demerit goods such as tobacco and aerated drinks. The idea is simple: these products harm public health and burden society, so taxing them more heavily can discourage their consumption while generating additional revenue for crucial sectors like health and education.
Currently, there is no specific 'sin goods' category under the GST structure. The creation of such a category would send a strong message that India prioritizes the well-being of its people over the profits of industries that thrive on unhealthy habits. Tobacco alone kills over 13 lakh Indians annually, yet it remains surprisingly affordable due to inadequate taxation.
The ruling government and the Union Finance Ministry deserve recognition for considering this long-overdue measure. By ensuring harmful products bear their fair share of taxes, they are paving the way for much-needed reforms. For instance, the GoM is reportedly proposing changes that could make school essentials like notebooks cheaper, and plans to lower GST on health and life insurance premiums. These steps reflect a balanced approach—offering relief to common people while funding these initiatives through increased taxes on demerit goods.
But this is easier said than done. The tobacco industry, notorious for its deep pockets and aggressive lobbying, will resist tooth and nail. They may claim that higher taxes lead to illegal trade or harm farmers, but countless studies show otherwise. Taxing tobacco products effectively reduces their affordability, curbs consumption, and leads to better public health outcomes. It is critical that these addictive and killer products be made increasingly unaffordable through regular and consistent taxation hikes, ensuring that taxes keep pace with inflation.
Globally, over 40 countries levy taxes on tobacco that constitute more than 75% of its retail price, yet in India, the burden is far lower. The WHO and other health organizations have long recommended significant tax increases on tobacco to counter its devastating impact. It’s worth noting that every ₹100 earned in tobacco tax imposes a societal cost of ₹816 in health and productivity losses.
This is also a chance to address inequities within the existing tax structure. For instance, bidis are taxed at far lower rates than cigarettes, even though they are equally harmful. Ensuring that all tobacco products face higher taxes can create a level playing field and maximize public health benefits.
If the GST Council adopts the GoM’s recommendations during its December 21 meeting, it will mark a turning point for India. The revenue from sin taxes can be funneled into health and education programs, easing the financial strain on families and creating a healthier, more productive society.
Ultimately, the question is simple: Do we want our children to have a better future? If yes, then it’s time to let harmful products like tobacco pay the price for the harm they cause. Let’s hope the GST Council seizes this opportunity to prioritize the nation's well-being over vested interests. A well-structured 'sin goods' category could serve as a cornerstone of India's fiscal policy, ensuring sustainable revenues while curbing harmful consumption.
By acting decisively, the government can silence the tobacco industry’s lobbying and prove that it values the lives and well-being of its citizens above all else. This is not just a policy adjustment; it’s a bold step toward a healthier, more educated, and prosperous India.
India stands at a crossroads. Let us seize this moment to make history—not just for revenue charts but for the lives of 1.4 billion people who deserve a healthier future.
(The writer is a senior journalist who received training in scientific journalism from the National Cancer Institute, USA.)