Health ministry for imposition of tobacco tax

The health ministry expressed concern that despite regular tax increases on most tobacco products both at central and state levels.

New Delhi, April 10: The health ministry has asked the finance ministry to do away with tax exemptions traditionally given to the bidi industry and impose a uniform 28 per cent tax when the GST regime is rolled out.

The health ministry welcomed the step to keep aerated drinks, tobacco products, luxury cars and pan masala in the 'demerit goods' category and placing it in the slab of highest tax - 28 per cent and over and above a cess to be imposed on all these demerit goods, without any exception.

"It is therefore suggested that the cess levied under the GST should be high enough to make these demerit products unaffordable over a period of time. "The tiered tax structure for cigarettes needs to be done away with as these slabs are open to manipulation for products substitution and promotion," the ministry said in a letter to the finance ministry.

The letter also referred to the suggestion that the proceeds of the health cess be used to fund the Rashtriya Swastha Bima Yojna. The letter highlighted that under the GST it is proposed that the business having an annual turnover below Rs 20 lakh will be exempted from this tax.

The health ministry recommended that such exemptions should not apply to those producing demerit goods like tobacco, aerated drinks and pan masala.

It argued that such an exemption was earlier given to bidi industry wherein units producing less than 20 lakh bidis were exempted from paying Central Excise Tax.

Taking advantage of this exemption, bidi manufacturers closed bigger units and started producing on small scale under different names in a clandestine manner, resulting in huge tax evasions.

Further, this policy has shifted the production base to the homes of the poor and disadvantage that are rolling bidis in their homes, at abysmally low wages, devoid of any labour welfare benefits and being at the mercy of middlemen, the letter said.

PTI