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Revisiting the tax treatment of bidis in India
  1. Mark Goodchild1,
  2. Vineet Gill Munish2,
  3. Praveen Sinha2,
  4. Fikru Tesfaye Tullu2,
  5. Jeremias Paul1
  1. 1Health Promotion Department, World Health Organization, Geneva, Switzerland
  2. 2World Health Organization, New Delhi, India
  1. Correspondence to Mark Goodchild, World Health Organization, Geneva, Switzerland; goodchildm{at}who.int

Abstract

Background Bidi use remains an intractable public health problem for India. This is partly due to the informal nature of the bidi supply chain, including tax exemptions for small producers. The aim of this paper is to assess the impact of making all bidis subject to duty and Goods and Services Tax. Although this may require legislative changes and incur some extra administrative costs, the net benefits would include greater oversight of the supply chain as well as increased tax revenues and reduced consumption.

Methods We use a form of gap analysis (the difference between duty paid and total bidi consumption) to estimate the number of tax-exempt bidis. We then use local evidence on the price elasticity of demand for bidis to assess the impact of eliminating these exemptions on the price and consumption of presently tax-exempt bidis.

Findings Total bidi consumption is estimated at 400 billion sticks per annum, including 275 billion duty paid sticks and 125 billion duty exempt sticks. Removing the small producer exemptions would increase the price of currently exempt bidis by INR4.6/pack. Total bidi consumption would decrease by 6% and the number of smokers would decrease by 2.2 million adults. This would bring the rate of bidi smoking down from 7.7% to 7.5%, while generating INR14.8 billion in tax revenues.

Conclusions Eliminating India’s tax exemptions for small bidis producers would make a significant contribution to tobacco control, both directly by reducing the number of smokers and indirectly by plugging a loophole in the supply chain.

  • economics
  • taxation
  • public policy

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Footnotes

  • Contributors MG designed the study, collected the data, undertook the analysis, and drafted the manuscript. VM and PS contributed to country data collection, analysis, and drafting of the manuscript. FT and JP contributed to the study design and drafting of the manuscript.

  • Funding The authors have not declared a specific grant for this research from any funding agency in the public, commercial or not-for-profit sectors.

  • 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 online supplemental information.

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