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MUMBAI: If you think God had nothing to do with governance, think again. God fearing Indians are to be reminded that activities such as smoking cigarettes, drinking alcohol or gambling condemn you to hell, as the government deliberates imposing a “sin tax.”
The proposed GST structure -- which is the main point of deliberation this winter session of parliament -- that seeks to bring in a uniform indirect tax regime across the country, has a provision for the “sin tax.” A senior Finance Ministry official quoted in the Business Standard says, “We have kept a provision of having an additional tax for the sinful industries such as alcohol and tobacco.”
Ironically, the “sin tax” is the one thing political parties seem to agree on, with the Congress party having debated the tax through a proposal from the then Planning Commission in its 12th plan document (2012-2017). The idea was to discourage the consumption of these harmful products as well as raise funds for public health measures -- especially deaddiction and awareness.
However, it didn’t work. As an article in Mid Day quotes Narendra Taneja, head of the BJP Economic Affairs Cell, “Alcoholism and tobacco-related deaths are on the rise, it’s a huge burden on the country’s medical bill.”
While the idea of increasing taxes on alcohol and cigarettes may be a standard move, as countries all over the world tax these items heavily to discourage use as well as increase tax revenue, it is the description of the tax as a “sin tax” that may be problematic.
Further, as noted psychologist Ashis Nandy points out in Mid Day, “I wonder whether those into tobacco or alcohol will look into this aspect of sin; they will consider it as an additional tax. The government will pick up some extra cash. Extra taxes have never deterred consumption of any product in India.”
There is also the question of the black economy heavy taxation encourages, the burden of which falls more on poorer sections of society. Dr Amir Ullah Khan, a seasoned economist and a consultant with the Bill and Melinda Gates Foundation, pointed out to Mid Day that sin taxes have, historically, triggered rampant smuggling when they create a huge price difference between neighbouring jurisdictions. “It discriminates against the lower classes; poor people pay a greater amount of their income as tax. And if the poor end up paying more tax, then the entire purpose of this tax would be defeated. The government needs to be very careful with this one,” Khan explains.
The government, however, seems keen to push through with the “sin tax” although the details are yet to be finalised. The Finance Ministry is currently seeking inputs from the industry and other stakeholders at national, state and local levels on the GST law. “Everybody is getting a chance to interact with us so that they get a clarity on the concept and the business processes, which we are in the process of finalising," a finance ministry official quoted in Business Standard said. “We are waiting for the comments and suggestions and we will be going through all suggestions from the industry. After making necessary changes based on those suggestions, a final report would be placed before the GST council before the final GST law is framed.”
The other problem is the deadlock in parliament over the GST Bill -- which the Modi government promised to have passed in 2016. The Congress party well aware of its new found importance with the Modi government, is now sharply divided on the GST legislation. Although this was its own legislation, there is a visible reluctance within to concede political ground to the BJP given the animosity between the two political parties. Sources said that it was now highly unlikely that the Bill that requires a constitutional amendment will be passed in this session as Sonia Gandhi and Congress vice president Rahul Gandhi are completely opposed to it.
Chances are, your “sins” will continue as they did thanks to political bickering (Indian politics FTW!)
