On September 3, Finance Minister Nirmala Sitharaman made several announcements. She categorized most food items and daily essentials under the 5% GST bracket, while some products were placed in the 18% GST slab.
However, the GST on harmful products like cigarettes and tobacco was increased to 40%, but the GST on bidis was reduced to the 18% slab. Furthermore, the GST on tendu leaves, used in bidi production, was reduced from 18% to 5%. Currently, products like cigarettes, tobacco, and bidis are subjected to a 28% GST. With this new change, bidis get cheaper, while cigarettes and tobacco become more expensive.
This move has sparked political debate in Bihar. Kerala Congress, attempting to corner the government, made a tweet comparing Bihar to bidis, stirring political controversy.
Why is GST on Bidis 18%?
Meanwhile, questions arise: why reduce GST on bidis to 18% when products like cigarettes and tobacco are taxed at 40%? This decision surprised the public, who questioned if cigarettes are harmful, are bidis not? Some connected this to the forthcoming Bihar assembly elections.
Why Reduce GST on Bidis?
The GST cut on bidis might aim to save the domestic bidi industry, as trade unions indicate that it employs 6 to 7 million people, with significant female participation. According to the Ministry of Labour and Employment, approximately 4 million people are directly linked to the bidi industry nationwide.
Social organizations linked with RSS, BJP's ideological backbone, among others, urged the government to reduce the 28% GST rate on bidis. They argue this cut would assist workers.
The Swadeshi Jagran Manch wrote to Finance Minister Nirmala Sitharaman, stating that the 28% GST adversely affected employment in the registered bidi manufacturing sector. Unregistered bidi production units also faced challenges, impacting laborers. The organization noted that earlier, bidis had minimal duties and no sales tax in several states, resulting in fewer difficulties for workers.
When will the New Rates Apply?
The government stated that the GST rate alterations will take effect on September 22. However, products like cigarettes, pan masala, gutkha, bidis, and other tobacco products will continue to be sold at the same rate until the completion of loan and interest payment obligations under the compensation cess account.
