Tuesday, May 19, 2020

Government Revenue Collections Can Increase by Rs 30,000 Crore Through Regulation of Non-Virginia Tobacco

National Health Forum (NHF), India’s leading NGO working in the field of tobacco control and which has been involved in various key effective activities on tobacco control measures, lauded the efforts being made by the Government of India in fighting the Covid-19 pandemic.

NHF, through its letter to the Ministry of Finance and Ministry of Health Family Welfare has appealed to the Government for regulating the sale of non-Virginia tobacco by ensuring that the sale of non-Virginia tobacco is processed through auction platforms overseen by the Tobacco Board of India or via APMCs and taxing the non-Virginia tobacco at the same tax as the Virginia tobacco on per kilogram basis. The initiative will have a double benefit, firstly the enhancement of revenue and secondly controlling the sale of the so far unregulated tobacco products in India.

According to Mandakini Sinh, Managing Trustee, NHF, “As per our estimates, a 30% levy as a reverse charge levied upon and paid by the manufacturers and dealers of non-Virginia tobacco products will yield a revenue increment of around Rs. 30,000 crores. This will lead to a far wider net of taxation and all types of tobaccos will be uniformly brought into the tax net. Currently, all tobacco products manufactured using non-Virginia tobacco (such as Burley tobacco) are in the unorganized sector and there is large scale evasion of tax by manufacturers and scant respect for the tobacco control laws.”

Presently, non-Virginia tobacco is freely sold without any intervention by the government and in the process, the Indian farmer gets a raw deal. The non-Virginia tobacco is used in the manufacture of chewing varieties of tobacco, hookah, gutkha, kiwam, gudaku , zarda and bidis. These non-Virginia tobaccos constitute about 85% of tobacco grown in India. And these are neither appropriately taxed nor it’s growers who are the poorest of poor farmers get stable prices for their produce. There are private intermediaries and middlemen who take advantage of the situation and milk the poor Indian farmers.

Virginia Tobacco on the other hand, is properly and strictly controlled and taxed by the government with checks and balances in place, such that not only proper revenue is generated but the interest of the farmer is also addressed.

A sizeable quantity of the non-Virginia tobacco goes in the manufacture of chewing tobacco, gutkha, Pan Masala with tobacco, zarda and snuff which are all products that are extremely dangerous in the context of the COVID-19 pandemic as they need to be spat out after consumption.

There is no doubt in our mind and other like minded NGOs that if the government regulates the sale and distribution of non-Virginia tobacco as it has done in the case of Virginia tobacco, it will lead to fair and uniform taxation of all tobacco products and definitely benefit our farmers (who are currently not paid for almost a year after the sale occurs due to the price setting power of the powerful middle man).

COVID 19 pandemic has caused widespread destruction of economic activity and there is a need to channel increased resources in resurrecting economic activity and provide relief to the jobless. A new source of tax collection to the tune of 30 thousand crore will be a great boost to support the post COVID rebuilding efforts.

In conclusion, we reiterate and compliment the Government and the Ministry of Finance for proposing this measure, which is a step in the right direction and seeking to bring a structured and regulatory layer between the farmer and the manufacturers of tobacco products using non-Virginia tobacco, which will not only benefit the Indian farmer but also immensely benefit revenue collection and will curb the consumption of these pernicious products.

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