BACKGROUND: Smoking is the primary cause of 79.8 percent of all tobacco-related deaths, as reported by WHO in 2021. Cigarettes are one of the major components of smoking tobacco. The most effective method of preventing cigarette consumption is through taxes. To establish a uniform tax system, India implemented the Goods and Services Tax (GST) in 2017. This study aims at examining the trends in taxes in India during the pre-GST and post-GST periods.
METHODS: Retail prices, wholesale prices and price indices from Centre for Monitoring Indian Economy (CMIE) and per capita income from Reserve Bank of India (RBI) were utilised to examine current and real (inflation-adjusted) prices, affordability (cost in terms of income), and key tax changes at the national level.
RESULTS: The study shows that the consumer price of cigarettes increased at a constant rate from 2013 to 2020. Following 2020, there was a rise in retail price from 2020 to 2021. After 2021, retail prices of cigarettes remained constant. In contrast to the consumer price, the wholesale price had minimal variation with a slight decline. From 2013 to 2020, per capita income had a modest growth at a consistent rate. Following 2020, there was a decline in per capita incomes from 2020 to 2021, following which a rise occurred. The consumer price index (CPI) indicated that cigarette affordability stayed constant from 2013 to 2020, declined from 2020 to 2021, and subsequently rose from 2021 to 2023.
CONCLUSIONS: The consumer prices of cigarette in the post-GST period initially rose and thereafter has remained stable, indicating enhanced scope of illicit trade. Further, the gap in CPI and WPI indicates that the taxes rises are being absorbed by the industry thus making cigarettes affordable. The findings of the study indicate opportunity for cigarette tax increase.