Punjab cuts VAT on cigarettes, draws flak

A recent decision of the Punjab government to drastically reduce value added tax (VAT) on cigarettes is being criticised for health and religious reasons.

Less than a year after the Punjab government increased the VAT on cigarettes from 20.5 percent to 50 percent - with the additional Rs.100 crore raised going to the Punjab Cancer Fund - the decision has been reversed. The increase was announced last March by Finance Minister Parminder Singh Dhindsa while presenting the budget for 2013-14. In just 10 months, the state cabinet reversed the decision, reverting to the previous 20.5 percent.

By this U-turn, the Parkash Singh Badal government has clearly cut down the state's contribution to the Punjab Cancer Fund by Rs.100 crore annually.

The incidence of cancer has increased manifold in Punjab in recent years and has been an area of concern for Chief Minister Badal himself.

While the tax has been rolled back, there is no mention of how the Rs.100 crore annual loss to the cancer fund would be accounted for. The government is now claiming that increased sale of cigarettes after the tax reduction will generate revenue and this would be used for cancer patients.

The Badal government has sought to justify the tax roll-back, saying that smuggling of cigarettes from neighbouring states, where the tax is 20 percent, has increased in the past 10 months and the tax reduction was meant to contain smuggling.

NGOs are unwilling to buy this argument. They point out that the Punjab government's step was detrimental to the health of people, especially those who smoke. They allege that the Badal government effected the roll-back under pressure from top tobacco companies. One top tobacco honcho was recently in the state and shared the dais with Badal and his son and Deputy Chief Minister Sukhbir Singh Badal at the Progressive Punjab Investors' Summit. He also promised to make investments in the state.

The NGOs say that if cigarette was being smuggled into Punjab after last year's tax hike, it is the fault of various agencies and departments of the state government which were unable to curb this.

Even the opposition Congress has pointed out that the the Badal government's reversal went against the "panthic credentials" of the ruling Shiromani Akali Dal.

The party, which claims to be the upholder of panthic (Sikh religious) ideology, knows full well that the Sikh religion strictly bans the use of tobacco and its related products. By reducing the tax on cigarettes, the Akali Dal government is hardly going by the Sikh religious tenets.

Till a few years ago, the Akali Dal did not even shy away from taking political donations from a leading tobacco products company despite its high moral ground on upholding the panthic agenda.

"It was the most shameful and senseless decision of the state government led by Parkash Singh Badal, who represents a party with so-called panthic credentials. The decision was taken under pressure from tobacco companies due to declining sales of cigarettes in the state. The Punjab government has no concern for the health of the people of Punjab. A ridiculous justification is being made by the state government that the money earned from sale of cigarettes would be spent on cancer patients," Punjab Congress president Pratap Singh Bajwa said.

Ironically, top Sikh leaders and clergy have chosen to remain quiet on the issue.

It is clear that vested commercial interests have swayed the government over those concerning health and religious issues.