"GST Reform Widens Bidi Tax Gap, Raising Public Health Concerns"
Pigouvian Tax
a tax on goods whose consumption generates negative externalities borne by society, not just the consumer
GST Council
constitutional body under Article 279A that recommends GST rates to Union and States
India's tobacco taxation framework has long distinguished between cigarettes and bidis. Cigarettes are produced by large, organised manufacturers and have historically attracted high excise duties and GST. Bidis, by contrast, are hand-rolled, produced predominantly by small and cottage-scale units, and have been taxed at far lower rates. This differential was originally justified on two grounds: protecting the livelihoods of millions of low-income workers, mostly women, who roll bidis at home, and shielding poor rural consumers from price shocks.
Under the Goods and Services Tax (GST) framework, which replaced a patchwork of central excise duties, state VAT, and other levies, tobacco products were placed in the highest tax slab. However, bidis were consistently kept at a lower rate than cigarettes and pan masala. The GST Council, a constitutional body under Article 279A, has the authority to recommend changes to GST rates. Central excise duties on tobacco products are levied separately under the Central Excise Act and are not subsumed by GST, creating a dual-tax structure. The WHO Framework Convention on Tobacco Control (FCTC), to which India is a signatory, recommends that tobacco taxes constitute at least 75 per cent of the retail price of tobacco products.
The GST framework taxes goods at multiple slabs: 5%, 12%, 18%, and 28%, with an additional cess on demerit goods. Tobacco products generally attract the 28% slab plus a compensation cess. A recent reform pushed cigarettes, pan masala, gutka, and chewing tobacco to a 40 per cent GST slab, with the tax base shifted to the printed retail price (MRP) rather than the manufacturer's declared price. This change closed a long-exploited loophole where manufacturers under-declared prices to reduce tax liability.
Bidis, however, were moved in the opposite direction: their GST rate was reduced to 18 per cent, widening the gap with cigarettes to 22 percentage points in GST alone. Central excise compounds this gap further. Cigarettes carry excise duties of Rs 2,050 to Rs 8,500 per 1,000 sticks depending on length. Bidis largely escape this excise burden. …
What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'?
1.It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2.It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.
3.It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements:
1.Tax revenue as a percent of GDP of India has steadily increased in the last decade.
2.Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct?
The WHO Framework Convention on Tobacco Control (FCTC) recommends that tobacco taxes should constitute what minimum share of the retail price of tobacco products?
Assertion (A): Keeping bidi prices artificially low through low taxation is a pro-poor policy.
Reason (R): Bidi consumption is concentrated in low-income and rural households, and higher prices would reduce their purchasing power.
Which one of the following is correct?
The GST Council of India is constituted under which Article of the Constitution?
With reference to the taxation of tobacco products in India, which of the following correctly describes the significance of shifting the GST tax base to the 'printed retail price' (MRP)?
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