Has tax reforms in India been effective in tobacco control: Evidences on affordability of cigarette after introduction of Goods and Service Tax

Abstract

Background: Taxes are the most cost-effective mechanism to deter tobacco consumption. However, the tobacco tax system has not been favorable in India. India introduced Goods and Service Tax (GST) in 2017 to make the tax system uniform. This paper seeks to examine the role of the newly rolled out tax system on cigarette prices and affordability and hence consumption. Methods: We used secondary data from different government publications and conducted simple statistical analysis – to present price changes, affordability of cigarette in pre and post GST regime. Affordability was estimated comparing per capita income with price index of cigarette. Results: The findings suggest that the tax structure has not been simplified with multiple taxes imposed based upon the length of cigarettes. The relative WPI of cigarettes is increasing suggesting higher increase in cigarette prices than general price. Affordability though declined in the initial two years as compared to WPI and per capita income, it remained neutral in the post GST regime. Conclusions: The findings suggest that tax reform should aim at influencing affordability adequately so that it deters consumption of cigarette.

Keywords

• cigarette affordability
• cigarette price variation
• cigarette tax
• goods and services tax