June 16th, 2015:

http://indianexpress.com/article/india/india-others/in-public-interest-rajasthan-slashes-tax-on-cigarettes-gutka/

The move has come under severe criticism from health associations and the opposition.

The state government reduced VAT on “tobacco and its products excluding bidi” to 45 per cent, from the existing 65 per cent, saying it was “expedient to do so in public interest”.

Barely six months after being honoured by the World Health Organisation (WHO) for its strict tax regime — one of the highest in the country— on tobacco products, the Rajasthan government slashed taxes on tobacco products, like cigarettes and gutka, by as much as 20 per cent.

In an order passed on Friday last week, the state government reduced VAT on “tobacco and its products excluding bidi” to 45 per cent, from the existing 65 per cent, saying it was “expedient to do so in public interest”.

The move has come under severe criticism from health associations and the opposition, Congress, who claim it will translate into a direct rise in sale and consumption of tobacco products.

On pan masala too, VAT was reduced to 35 per cent from 65 per cent.

However, the existing 65 per cent VAT on bidis has been left unchanged.

“The massive cut in the tax on tobacco is directly playing with the health of the people of Rajasthan,” state’s former chief minister, Ashok Gehlot, said.

“It seems, the state government has joined the select group of BJP MPs, who said earlier this year that bidis and tobacco were not harmful,” he added.

In December last year, the Vasundhara Raje government received the World No Tobacco Day award from the WHO’s South-East Asia Regional Office (SEARO).

The award was given to the state finance department for its strict tax regime on tobacco.

“States like Rajasthan have taken significant steps to tax all tobacco products including bidis at 65 per cent (VAT). This has resulted in a concomitant increase in bidi prices in the state. In recognition of this initiative, WHO has conferred the World No Tobacco Day 2014 Award to the Government of Rajasthan,” the WHO had said in a statement issued last year.

The WHO advocates higher taxes — at least 70 per cent of retail prices — on tobacco products as a major deterrent to curb consumption and “leading to large reductions in the death and disease caused by tobacco use”.

“The high tax was getting the state government Rs 750 crore in revenues and was curbing consumption too. And the government itself had admitted in the Assembly, in March, that the expenditure on curing tobacco-related aliments — Rs 1,160 crore — was much higher,” said Satyen Chaturvedi, representative of the Rajasthan Voluntary Health Association.

However, Health minister Rajendra Rathore defended the government’s decision.

“High VAT does not mean low consumption, otherwise tobacco use would vary across states based on VAT. The government is committed to curbing tobacco use and we are doing it through various campaigns,” said Rathore.