Raising taxes can be a big burden for the middle class and is often unpopular among people. However, there is one tax that, when increased, will delight its supporters and also help people improve their health. Have you ever wondered why cigarettes and alcohol are so expensive? It is because they have a special tax called “sin tax” that makes them cost more. This tax is used to discourage people from buying things that are bad for their health.

What is Sin Tax?

A sin tax is a type of tax that is charged on products that are bad for people’s health and society. These taxes are usually high and are applied to things like tobacco, alcohol, cigarettes, and gambling. The idea behind the sin tax is to make these products more expensive, so people are less likely to use them. The concept of sin tax in India was introduced as a part of goods and service tax (GST) in 2017.

Sin Tax in India

In India, a sin tax is applied to products like tobacco, sugary drinks, and pan masala. The government uses the money from this tax to help states that lose revenue due to tax changes.

Tobacco is a big health risk, it causes many deaths and diseases like cancer. Therefore, to discourage its use, the government has put a high tax on tobacco products. For example, cigarettes have a tax of around 52.7 per cent of their final price.

Goal of Sin Tax

The goal of the sin tax is to make unhealthy products more expensive, so people are less likely to buy them. This can help improve public health and reduce the number of people who get sick or die from using these products.

What WHO recommend?

The World Health Organization recommends that taxes on tobacco products should be at least 75 per cent of their retail price. However, India’s tax on tobacco is still lower than that. To change this, the government formed a panel in October to create a new tax policy for tobacco products, focusing on public health. 

Alcohol is taxed differently, as it’s not part of the GST. Each state taxes alcohol separately, and this is a big source of revenue for them.