Our Bureau

New Delhi, Feb. 28

TAKING a cue from the success of the education cess, the Finance Minister, Mr P. Chidambaram, has decided to levy a cess on pan masala and tobacco products to fund the health sector. The Government expects to mop-up revenues of Rs 700 crore to fund the National Rural Health Mission.

Announcing this, Mr Chidambaram said, "The levy of education cess has been widely applauded. The health sector demands similar treatment. What better way is there to fund healthcare than tax those goods that are health hazards?"

The Finance Ministry has decided to increased the specific rate on cigarettes by 10 per cent and imposed a surcharge of 10 per cent on ad valorem duties on other tobacco products including gutka, chewing tobacco, snuff and pan masala. Bidis have been exempted from this levy.

The health Mmssion will be launched next fiscal. The total allocation to the Ministry of Health and Family Welfare will increase from Rs 8420 crore to Rs 10,280 crore next year.

Reacting to this, Mr Udayan Lal, Director, Tobacco Institute of India (TII), said, "An increase in the levies on cigarettes further increases the skewed tax structure in the tobacco industry. The selective imposition of a cess on a revenue efficient products such as a cigarette is likely to work against the revenue interest of the state as it forces consumers to shift to cheaper and revenue inefficient forms of tobacco consumption like gutkha and bidis." TII, represents the organised segment of the industry.

(This article was published in the Business Line print edition dated March 1, 2005)
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