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Trends in affordability of tobacco products before and after the transition to GST in India
  1. Rijo M John1,
  2. Estelle Dauchy2
  1. 1Centre for Public Policy Research, Kochi, India
  2. 2International Research, Campaign for Tobacco-Free Kids, Washington, DC, USA
  1. Correspondence to Dr Rijo M John, Centre for Public Policy Research, Kochi 682020, India; rmjohn{at}gmail.com

Abstract

Objective To estimate the trends in affordability of bidis, cigarettes and smokeless tobacco (SLT) in India and examine the impact of transition from the earlier indirect taxation system to the new goods and services tax (GST) on the affordability.

Methods Retail price data and per-capita gross domestic product data were used to examine the trends in affordability of cigarettes, bidis and SLT from 2007–2008 to 2018–2019. Relative income price defined as the share of real per-capita income required to purchase a given quantity of a product was used to measure affordability. Changes in affordability were decomposed to disaggregate the effects of real prices or income changes.

Findings On average, cigarettes, bidis and SLT have become increasingly affordable over the past 10 years. Bidis were found to be nine times more affordable than cigarettes. The GST has accentuated the increase in the affordability of cigarettes and SLT, and did not significantly alter the high affordability of bidis. In general, states with high (low) value-added tax rates during the pre-GST period experienced increases (decreases) in tobacco products’ affordability after GST.

Conclusion Bidis continue to be highly affordable while the affordability of cigarettes and SLT increased mainly due to lack of any tax changes after GST and the growth in per-capita income. To effectively reduce affordability, significant increase in either the excise taxes and/or the compensation cess—a temporary duty in addition to GST—is warranted. Compensation cess should also be applied on bidis to address the huge tobacco use problem in India.

  • price
  • taxation
  • low/middle income country
  • non-cigarette tobacco products
  • public policy
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Footnotes

  • Contributors RMJ and ED conceived the research idea and finalised the methods. RMJ analysed the data and wrote the first draft. Both authors contributed to the interpretation of results, drafting and finalising the manuscript.

  • Funding The Campaign for Tobacco-Free Kids.

  • Competing interests None declared.

  • Patient consent for publication Not required.

  • Provenance and peer review Not commissioned; externally peer reviewed.

  • Data availability statement All data relevant to the study are included in the article or uploaded as supplementary information. Available data from public domain were used for the analysis. http://labourbureaucpi.gov.in provides all price data and https://www.rbi.org.in/ has data on gross domestic product.

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