Small time vendors in Chandigarh anguished over GST hike move on tobacco products

Chandigarh, Dec 19: The Footpath Cycle and Rehri Fadi Workers Union of Chandigarh has expressed resentment over the proposal to introduce 35 per cent Goods and Services Tax (GST) on "sin goods" like aerated beverages and tobacco products, saying the hike would badly impact their incomes and lead to smuggling and revenue loss for the country too.

"With consumers already avoiding buying legal cigarettes owing to high prices on account of high taxes, the new increase will push many of them permanently towards illegal products being sold at much lower prices," union president Ram Millan Gaud told on Thursday. The union, comprising over 1,200 small time members who sell tobacco products on small roadside kiosks, said the "government would lose revenues that it collects from legal sales and at the same time, law abiding retailers would lose their income and livelihood".

"It seems the government is bent on benefiting illegal operators and smugglers at the expense of tax-paying legal industry and law abiding retailers," Gaud added. On December 2, the Group of Ministers on GST rate rationalisation decided to hike tax on "sin goods". The 55th GST Council meeting, scheduled on December 21 in Rajasthan's Jaisalmer, may discuss key issues, including the current GST structure on life and health insurance, rate rationalisation measures and GST tax slabs.

The Swadeshi Jagran Manch (SJM), the economic arm of the Rashtriya Swayamsevak Sangh (RSS), has already opposed the proposal to introduce a 35 per cent GST on "sin goods". The proposal, if accepted by the GST Council, would "defeat" the very efficiency principle of taxation, the SJM said.

"Having another slab in GST, in the name of luxury and sin goods is primarily a bad idea, which will defeat the very efficient principle of taxation. Already, a need is being felt among economists that the present number of slabs should be reduced, and the highest 28 per cent slab be abolished. If we add yet another higher slab, it would make GST even more complex and inefficient. This may or may not help increase revenue, but will make it inefficient. The proposal of introducing a new extra tax slab of 35 per cent on so-called sin goods is ill-conceived," an official statement quoting SJM national co-convenor Ashwani Mahajan said.

Advocating the need to raise awareness about the health and economic harms of tobacco, he warned of the expanding menace of the "China-led black market" owing to excessive taxation. Illegal sale of imported cigarettes in Punjab and Haryana has become common and poses a serious threat to the health of smokers who are getting hooked to catchy packs of international brands, anti-tobacco activists say.

They say that selling illegal cigarettes, an organised crime, is not only evading the state's high taxes but also playing with the lives of smokers, mainly first timers, because of inferior manufacturing processes and low-quality tobacco with high levels of tar and nicotine. Trade insiders told that Punjab and Haryana alone have an annual legal market of 120 million and 100 million cigarettes, respectively, and the illegal market in both states accounts for 20 per cent of the total trade.

Chandigarh and Panchkula cities have a market of 30 million and six million cigarettes annually, respectively, and the illegal market also has a share of 15-20 per cent. Most of the illegal cigarette brands originate from China and Indonesia and the retailers are attracted to them as they are available at a significantly lower price than the legal cigarettes. They are sold in the market at one-fifth the price of a legal product.