Hike Tax on Tobacco, reduce affordability and increase revenue – Doctors, Civil society organisations to GST Council



Panaji : Civil Society Organisations along with doctors are urging the GST Council to increase compensation cess on all tobacco products to generate additional revenue for the Government. In their appeals to GST council they are urging it to consider an extra-ordinary measure of levying compensation cess on all tobacco products to get additional revenues. This tax revenue from tobacco could significantly contribute to the increased need for resources during the pandemic including vaccinations and augmenting the health infrastructure to prepare for a possible third wave. According to the group, increasing tobacco taxes in these challenging times, will be WIN-WIN policy as it can address the economic shock from COVID-19 pandemic and directly reduce COVID 19 related co-morbidities.

The COVID-19 has been major shock to the country, and it far surpassed the first wave. The Government of India had already announced various fiscal and economic stimulus measures to boost the economy and compensate people affected from the negative economic shock from the pandemic when the first wave hit India. The financial needs for the exchequer continue to grow on the face of the vast resources needed for the vaccination drive and for the preparation for a possible third wave of the pandemic. The GST revenue receipts of both central and states governments have been severely affected due to the COVID-19 pandemic and, as a result, the central government has not been able to distribute the compensation cess dues to different state governments as guaranteed under the GST.

Increasing the existing compensation cess on cigarettes and smokeless tobacco products and levying compensation cess on bidis can be a very effective policy measure to address the immediate need to raise revenue by the central government to compensate State Governments for their respective GST revenue shortfalls during the pandemic time. It will be a winning proposition for generating revenue and reducing tobacco use and related diseases as well as COVID related co morbidities.

There has not been any major increase in tobacco taxes since the introduction of GST in July 2017 and all tobacco products have become more affordable over the past three years. The total tax burden (taxes as a percentage of final tax inclusive retail price) is only about 52.7% for cigarettes, 22% for bidis and 63.8% for smokeless tobacco. This is much lower than the World Health Organization (WHO) recommended tax burden of at least 75% of retail price for all tobacco products. According to the WHO, raising the price of tobacco products through tax increases is the most effective policy to reduce tobacco use. Higher tobacco prices that decrease affordability, encourage quitting among users, prevent initiation among non-users, and reduce the quantity consumed among continuing users.

Unprecedented financial resources will be needed for the country to recover from the economic shock COVID-19 has created. Increasing compensation cess on all tobacco products will be a win-win proposition as it will bring in substantial revenue for the Government while motivating millions of tobacco users to quit and preventing youngsters from initiating tobacco use – Ashim Sanyal, Chief Executive Officer, Voluntary Organisation In Interest of Consumer Education (VOICE).


Tobacco use increases risk for severe COVID-19 infection, complications, and death. Available research suggests that smokers are at greater risk of developing severe disease and dying from COVID-19. Tobacco use which is a slow-moving pandemic itself claims the lives of 13 lakh Indians each year. It is critical than ever before to keep tobacco products out of the hands of vulnerable populations like youth and the underprivileged sections of society.


There is substantial proof that tobacco increases risk for severe Covid infection and complications following it. Tobacco users have greater risk of death following Covid. It is in the interest of the users as well as for the country to increase taxes on all tobacco products. This will reduce their affordability & consumption. It will then limit the vulnerability to COVID 19 infection and its complications Dr. Shekhar Salkar, Renowned Oncologist-Manipal Hospital Goa Higher tobacco prices that decrease affordability, encourage quitting among users, prevent initiation among non-users and reduce the quantity consumed among continuing users adds Dr.Salkar


India has the second largest number (268 million) of tobacco users in the world and of these 13 lakhs die every year from tobacco related diseases. Nearly 27% of all cancers in India are due to tobacco. The annual economic costs from all diseases and deaths attributable to tobacco use is estimated to be Rupees 177,341 crores in 2017-18 amounting to 1% of India’s GDP. This will continue to grow post COVID.

Dr shekhar salkar
National organisation for tobacco eradication (india)


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