Duty on tobacco tool to protect health, says NDA; will hurt poor the most: Opp, Pg6

Key Highlights:

• Parliament approved the Central Excise (Amendment) Bill, 2025, which will increase excise duty on tobacco products after the GST compensation cess ends.
• The Lok Sabha passed the Bill on Wednesday, and the Rajya Sabha returned it to the Lok Sabha on Thursday.
• The Finance Minister clarified that the excise duty will be shared with states based on the Finance Commission’s recommendations.
• The government aims to encourage farmers and bidi makers to shift from tobacco to other cash crops, with 1.12 lakh acres already diversified in 10 states.

Detailed Insights:

• The bill aims to reduce non-communicable diseases and promote public health by making tobacco products more expensive.
• A crop diversification scheme is underway in 10 states with high tobacco cultivation, including Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal.
• Some opposition members argued that the increased tax on beedis will disproportionately affect the poor and vulnerable beedi rollers.
• Concerns were raised regarding the equitable and transparent sharing of revenue collected from the cess with the states.
• The government views tobacco taxation as a tool for protecting public health and ensuring fiscal stability for both the Centre and states.
• The opposition alleges the bill will reduce the economic power of states and increase retail prices, while the government asserts the revenue will fund pro-poor and pro-farmer welfare programs.

Key Concepts Involved:

• Excise Duty: A tax levied on the production or sale of goods within a country.
• GST Compensation Cess: A levy imposed on certain goods and services to compensate states for revenue losses due to the implementation of the Goods and Services Tax (GST).
• Finance Commission: A constitutional body that recommends the principles governing the distribution of tax revenues between the Centre and the States.