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Bidis In GST System

Goods and Services Tax (GST) is a big step towards a modern, uniform, broad-based taxation system. The GST Council has decided on a four slab system wherein demerit goods like tobacco will be subjected to 28 per cent, which is the highest GST rate, plus an additional cess. The significance of this particular subject lies in the inclusion of all tobacco products, including bidis and chewing tobacco under tobacco.

The bidi sector- being a “poor man’s puff”, being a small-scale industry is exempt from many taxes. The sector may also be lobbying for a lower rate of GST. Keeping the countries’ development perspective in mind, the government must resist these efforts. It has the responsibility of protecting the health of its citizens. Also, it is the poor who suffers the most under the burden of diseases caused by smoking and the high medical expenses required for its treatment. The bidis smokers in poor rural areas are not covered properly under the protection net of tobacco control policies which have reached the India’s cigarette users, particularly the urban middle classes.  In India, the economic cost of tobacco use has been estimated at Rs.1,04,500 crore per year.

Tobacco taxation can be the most effective tool for reducing tobacco use among rural poor and the bidi smokers. It is also a ‘win-win’ situation as a fiscal policy. It will help in reducing the consumption of tobacco and increase the revenue generation. In fact, the dedicated funds financed by tobacco taxes can be used to help the rural poor to leave tobacco products and have access to better welfare and healthcare services.
GST reform can be a historic opportunity to implement a taxation system which supports sustainable development across equity, poverty, health, and good governance.

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