Budget 2014: Jaitley taxes unhealthy cigarettes, aerated drinks to improve fiscal health

Finance Minister Arun Jaitley has started working on improving his government’s fiscal health and he’s done it at the expense of unhealthy vices. His budget speech targeted India’s vices by hiking excise duty on cigarettes, tobacco products like gutkha and even sugary aerated drinks.

Delivering his maiden budget, Jaitley increased specific excise duty on cigarettes in the range of 11 percent to 72 percent and said similar hikes would be proposed on cigars,cheroots and cigarillos.

Seeming to heed the advice of the health minister Dr Harsh Vardhan, who has been pushing for higher tax on tobacco products, he has also increased excise duty from 12 percent to 16 percent on pan masala, from 50 percent to 55 percent on un-manufactured tobacco and from 60 percent to 70 percent on gutkha and chewing tobacco.

The Finance Minister’s announcement is welcome given the scale of tobacco related ailments in the country. According to a study, carried out by the Public Health Foundation of India, the total economic cost that can be attributed to tobacco use from all diseases in India for persons aged 35-69 amounted to Rs. 1045 billion in the year 2011.

The study also discovered that the cost from premature mortality alone was Rs 730 billion while that from direct medical costs amounted to Rs 168 billion.

Emulating the US system of taxing aerated drinks, the Finance Minister also chose to target aerated drinks but only those that contain sugar, sparing fruit juices and other aerated drinks like soda.

“I also propose to levy an additional duty of excise at 5 percent on aerated waters containing added sugar. These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health,” he said.

According to a report, sales of soft drinks in India have risen 13 per cent per annum since 1998 and a study has suggested that this could cause the number of obese persons in the age group of 24 to 65 years to rise from 39 to 49 percent, and would also raise the number of people suffering from diabetes.

Speaking to the media soon after the budget, Jaitley said that these were all things that people could live without. “I have no sympathy for those who need cigarettes, pan masala, gutkha and soft drinks. They can live without them”, he said.