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    Raising GST on Tobacco Products can be Win-Win for economy, say Heath groups & Doctors

    The GST revenue receipts of both central and states governments have been severely affected due to the pandemic

    GUWAHATI: As the government falls short of revenue amid the pandemic-led disruptions, the health groups, doctors, and economists have urged the GST Council to increase compensation cess on all tobacco products to boost revenue which can help generate additional tax revenue of Rs 49,740.

    This increased revenue could significantly contribute to the soaring need for compensation by different states during the pandemic and to disburse the dues already owed by the Centre, they said.

    Compensation cess is a part of the GST regime to compensate manufacturing states for loss in tax revenue.

    As an extraordinary measure, they have also appealed to the GST Council to apply the compensation cess on bidis and also increase the existing compensation cess applied on cigarettes and smokeless tobacco products during the upcoming meeting of the council.

    In a letter to Finance Minister Nirmala Sitharaman, the Voluntary Health Association of India (VHAI) wrote that it is urgent to increase taxes on all tobacco products, especially on bidis, to arrest health risks and garner additional tax revenue.

    India has the second-largest number of tobacco users (268 million or 28.6% of all adults in India) in the world – of these at least 12 lakh die every year from tobacco-related disease. The total direct and indirect cost of diseases attributed to tobacco use was a staggering Rs 1,04,500 crores in 2011 or 1.16% of India’s GDP, said the group.

    COVID-19 appears to be one of the biggest economic shockers India may have ever experienced, Rijo John, economist and health policy analyst, said.

    The GST revenue receipts of both central and states governments have been severely affected due to the pandemic and, as a result, the Centre has not been able to distribute the compensation cess dues to different states as guaranteed under the GST, he said

    “Unprecedented financial resources will be needed for the country to recover from the economic shock COVID-19 has created. Even though imposing additional taxes on the general public might not be a viable policy option when consumption needs to be boosted, compensation cess on tobacco could be a win-win measure as it will discourage tobacco consumption while bringing in substantial revenue for the government,” John said.

    In addition, the Government of India had also announced various fiscal and economic stimulus packages to boost the economy and compensate people affected by the negative economic shock from the pandemic.

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