GST On Bidis At 18%, Cigarettes At 40%: Why Tax Rate Differs On Two Tobacco Products

The Goods and Services Tax Council has increased rates on most tobacco products in an attempt to curb tobacco consumption in India, but bidi remains the curious exception.

As per the new rates decided by the GST Council, bidis will now attract a tax of 18%, as opposed to the earlier rate of 28%.

The GST Council has also reduced the rates on bidi wrapper leaves, also known as tendu, from 18% to 5%.

The government's decision to reduce GST rates on bidi comes at a time when rates for almost all tobacco products, including pan masala and cigarettes, will fall under a steep 40% slab.

The heart of that answer lies with the rural economy. According to government data, there are 49.82 lakh registered bidi workers, largely in small towns and villages.

Research collated by Frontiers shows that the bidi workforce is overwhelmingly female and home-based. In fact, 90% of the home-based bidi-making employment is dominated by women.

In rural and economically backwards areas, bidi-making is a piece-rate work that can be done from home, fitting around childcare and farm cycles.

However, low wages have always been a concern in this industry, with a 2023 British Safety Council report noting that a bidi worker earned 17% of the wage of an average worker in registered manufacturing in 2010–11.

The same report suggests that in West Bengal, workers often receive around Rs 150 per 1,000 bidis.

Another study from PubMed documents typical output of roughly 400–700 bidis a day from an average work, which, if accounted into the aforementioned rates, comes down to meagre daily income.

Keeping these factors in mind, a relief on taxes on bidi likely means two things: the government is looking to protect cash income for bidi rollers during a weak rural cycle, as cheaper bidis usually lead to higher consumption.

Another interesting factor to note is the relief on tendu or bidi wrapper leaves, which is a minor forest produce collected seasonally by lakhs of adivasi and rural households across central India.

Lowering GST here reduces input costs upstream without changing the final tax treatment of bidi. Ultimately, this helps protect a fragile forest-based livelihood.

New rates for Bidis would have to wait, though, as government has confirmed that rates on pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi will continue at the existing rates of GST and compensation cess where applicable, till loan and interest payment obligations under the compensation cess account are completely discharged.