If lying and bullshitting is journalism, Times Now is doing a fine job of it.
Public health is an emotional
subject. Even if our politicians do not give a damn to the state of the public
health centers & hospitals, quality of doctors, quacks and fake medicines,
they are expected to be sensitive to these issues in their grand utterances and
policy statements, at least.
So, when Rajasthan government
reduces VAT on tobacco products and claims it is in public interest
and Times
Now takes up this issue for discussion with taglines that state government is
playing with public health, helping the spread of cancer by promoting sale of
tobacco products, they project an image of vigilant media, ready to defend
public causes and exposing the big, bad government which works for corporates.
When they add a bit of Lalit Modi with undeclared interests in trade of tobacco
products with a quid pro quo stretched from some other holding it becomes a
full blown scam embellished with public interest, an issue of the size which
can cause governments to fall.
The whole argument is built on
the assumption that reduced VAT on tobacco products would reduce the price and
thus increase sale, spreading even more cancer in the state which would somehow
benefit Lalit Modi. Neat, saleable & impactful package!
But for a small problem.
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| Why be truthful when lies get you TRP? |
Reducing VAT does not repeat does not reduce selling price of
tobacco products. Yes. Repeating again, it does not. The base on which the
edifice is built does not exist, at all! Let me explain.
Present rate of VAT on cigarettes
in Delhi is 20% compared to 65% in Rajasthan. Delhi is proposing to increase it
to 30% and Rajasthan to 45% but let’s take existing rates for our argument.
Smokers would testify to this. Their
brand of cigarettes costs the same in Delhi and Dadra, despite the difference
in VAT rates! The branded bundle of bidis costs the same in Jaunpur or in Jamnagar.
So does Pan Masala, unless one is eating some unbranded concoction, rustled up
in the near the neighbourhood gutter. For
non smokers, the cost of a popular biscuit packet or soap remains the same
whether bought in Trichi or in Bhiwandi or Kolkata, irrespective of VAT rates.
It is so, because, tobacco
products (and lot of other products) are sold a uniform MRP which is
inclusive of tax, across the country whether rate of VAT is 20% as in Delhi or 65%
as in Rajasthan.
So, the argument that by reducing
VAT, Rajasthan government is promoting sale of tobacco products by reducing
their selling price is an absolute lie, in other words, pure bullshit. And the
whole argument crumbles.
Then, how is tax calculated & paid on these
products paid then?
“The opting dealer shall charge
tax on the maximum retail price if it is exclusive of tax and in case the
maximum retail price is inclusive of tax, the dealer shall charge tax on the
price as calculated hereunder.? Price = (Maximum Retail Price x 100) / (100
+Rate of tax)” Quote from Rajasthan finance department notification dated March
31st 2006. Link.
A similar extract from Arunachal
Pradesh Tax & Excise Department website, “Tax component and tax exclusive
price can be calculated by applying tax fraction [r/(r+100) where r is the tax
rate] on the MRP” Link.
Above means that MRP being sacrosanct,
payable VAT cannot be added to MRP. Instead, it is a fraction of MRP.
And this works for soaps,
shampoos, toothpastes, biscuits, chocolates, beauty products and off course
tobacco products. It also means that company selling same product in high VAT
states get less realization as compared to states with low VAT.
This differential VAT on MRP
mandated products leads to smuggling and counterfeit goods. Read the report, here,
by The Times of India ironically, which argues that high VAT %age on cigarettes
leads to smuggling and spread of counterfeit goods. The tobacco companies, in such
a case push their distributors based in low VAT states to surreptitiously
develop supply chains in bordering areas of high VAT states while squeezing the
high VAT state distributors, thus realizing more profit than they would have
made in the normal course of things. And as a result of this, the high VAT
state loses revenue to the low VAT state. Rajasthan does, Uttar Pradesh does,
to Delhi.
The bottom line is, this action
of Rajasthan Government does not affect sale of tobacco products in any way, the
consumers would not have even come to know of VAT change, unless they watched Times
Now. On the other hand, state tax revenues may go up by the simple action of
making smuggling a low return game by bringing the VAT rate closer to
neighbouring states.
But, there is one group which
loses its extra income; it is the distributors of big tobacco companies. This
maize of differential taxation gives them the opportunity to make an extra buck
by mixing the illicit goods in the smuggled consignments. The recipient of
goods at the other end cannot even complain about it, as the transaction is
illegal. A uniform taxation across all states would stop smuggling and probably
the spread of illicit goods too and this action of Rajasthan government is a
step in that direction.
If doubts of vested interests still
remain, they do not point towards this action by state government but towards
the way this issue was presented & projected, the way the whole argument
was built and the way an attempt was made to provoke the public despite knowing
that the premise is absolutely false. The vested interest accusation seems pointing
towards Times Now, instead.
As far as Lalit Modi is concerned, he is more like a chat masala for Times Now, injurious to health but full of taste, to be used to make the serving edible. He can spice up the things but he has ceased to be the main ingredient in the dish of news & opinions.
