Babuji aka Alok Nath is probably going crazy with bhajan kirtan right now. Apparently the GST Council has soaked in his sanskars. The Government is set to introduce a Sin Tax on alcohol and tobacco products to avert their consumption.
Reason for Sin Tax
For those who are wondering what sin tax is, allow me to enlighten you. Sin tax is a globally prevalent practice in which products like alcohol and tobacco have higher tax rates as compared to other essential goods. Sin tax is an excise tax on products and services considered to be bad for health or society. Some examples include alcohol, tobacco and gambling. ‘Sin Tax’ serves two for one. It is an effort to discourage people from using harmful products like cigarettes or bidis or services like gambling (because there’s nothing as precious as money). It also becomes one of the most common measures to shore up tax revenues. The logic is quite simple. Also, taxpayers generally don’t oppose such a tax as they are indirect in nature and affect only their end users.
Earlier, the VAT on cigarettes was 25% in Maharashtra and 65% in Rajasthan. Bidis had a very low Central and State taxes. Many prominent ministers wanted to increase the tax on cigarettes, bidis and alcohol.
In the 13th GST Council Meeting at the Capital, they capped the sin tax at 15%. These proceeds are to compensate states that have faced a reduction in revenue since GST implementation. The final tax incidence is not lower than the previous tax rates. The cess is chargeable on tobacco, luxury cars, pan masala and aerated drinks.
The council also decided to cap the cess rate on tobacco products (Sin Tax) as follows:
- cigarettes of up to 65 mm (both filter & non-filter): Rs. 485 per 1,000 sticks
- cigarettes longer than 65 mm & non-filter cigarettes: Rs. 792 per 1,000 sticks
- filter cigarettes: Rs. 621 per 1,000 sticks
- cigars and king-sized cigarettes: 36%
So what if the motives of Sanskari Babuji and the GST Council are not exactly the same? For at least sometime post July 1, there will be a decline in the sale of bidis, cigarettes and alcohol.