Despite chief minister Vasundhara Raje being praised for increasing value added tax (VAT) on cigarette by 15%, the move will hardly make cigarettes dearer and deter smokers, claims Rajasthan Voluntary Health Association (RVHA), an NGO working on rehabilitative healthcare systems.
RVHA executive director Satyen Chaturvedi said despite the proposed hike on cigarettes, companies will bear the increased cost and keep prices intact so as to avoid impact on production and consumption.
Chaturvedi added that prior to October 8, 2014, VAT on cigarettes was 65% after which the state government imposed different VATs of 8.28% and 16.67% based on length of the cigarette, filtered and non-filtered types respectively. The state government on June 2, 2015 and August 15, 2015 hiked the VAT keeping the tax limit from 14.48% to 35%.
The RVHA official said as per Global Adult Tobacco Survey, 50,000 people in Rajasthan fall prey to tobacco related diseases every year and the state spends Rs 1,160 crore on curing such ailments. “The World Health Organisation (WHO) believes consumption of tobacco products will decline with rising cost. So, it has appealed to governments to keep tax on tobacco over 70%, after which the government increased VAT to 65% on all tobacco products. Even today, VAT on bidi is 65%, 45% on tobacco and its products. It is 35% on pan masalas and the lowest tax of 14.48% to 35% is on cigarettes,” Chaturvedi said.
“Soon, Goods and Service Tax (GST) will be implemented and the Centre will compensate states proportionally for five years for its losses. If VAT on tobacco products is reduced in Rajasthan, the state will get lesser compensation from the Centre under GST,” he said.