To discourage tobacco use while protecting rural livelihoods, the GST Council implemented a tiered tax system. Cigarettes and similar products face a 40% GST, while bidis are taxed at 18%, and tendu leaves at 5%.
The GST Council on Wednesday overhauled tax rates on tobacco products, aiming to curb consumption while balancing economic realities. While cigarettes, gutkha, pan masala, and other tobacco products now fall under a steep 40% GST slab, bidis have been treated differently, with the tax rate reduced to 18%. Even bidi wrapper leaves, or tendu, now attract a lower GST of 5%.
This difference has left many wondering why the humble bidi is given special consideration, unlike its flashier cousin, the cigarette.
Protecting Rural Livelihoods
The answer lies in the heart of rural India. Bidi-making is a lifeline for nearly 50 lakh workers, mostly women, living in small towns and villages. Unlike factory-made cigarettes, bidis are often rolled at home, allowing women to balance work with household responsibilities and farm duties.
For many, this cottage-based work is their primary source of cash income. Studies show bidi workers earn only a fraction of what factory workers do—around Rs 150 for 1,000 bidis in states like West Bengal. With daily output ranging from 400 to 700 bidis, incomes are modest at best.
By keeping GST low on bidis, the government ensures these workers can earn a living without facing sudden spikes in tax burdens.
Supporting Tribal Communities
The reduction in GST on tendu leaves is another thoughtful touch. These leaves, classified as minor forest produce, are harvested seasonally by lakhs of tribal households across central India. Lower taxes on tendu reduce input costs for bidi production and help protect these fragile forest-based livelihoods.
A Careful Balancing Act
The government is essentially walking a tightrope—discouraging tobacco consumption through high taxes on cigarettes and other luxury tobacco products, while shielding rural incomes tied to bidi-making. Cheaper bidis might encourage more consumption, but they also prevent income shocks for some of the country’s most vulnerable workers.
However, the new rates won’t take effect immediately. Existing GST and compensation cess on bidis and other tobacco products will continue until the loans taken to compensate states for revenue losses during the pandemic are fully repaid.
The Bigger Picture
This approach highlights the Centre’s attempt to balance public health goals with economic realities. Cigarettes and luxury tobacco products will bear the brunt of higher taxes, while bidis remain a small but critical lifeline for millions in rural India.