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Q. Higher tax on sugary drinks: Discuss the issue of imposing higher demerit taxes on sugary drinks.
Mar 02, 2017 Related to : GS Paper-3 and 2

Ans :

Introduction-

About 50% of the world population is suffering with the issue of obesity due to various reasons. Excessive usages of sugary drinks like Coke, Pepsi are the main reasons behind the problem of overweight. Hence many countries around the globe have imposed higher taxes on such drinks to discourage these drinks.

Issue-

India under new GST regime is also considering imposing higher demerit rate of tax on the sugary drinks. This issue has become bone of contention between supporters and opponents of higher rate tax.

Arguments in favour-

  • The excessive consumption of sugary drinks is a major cause of health problems such as diabetes, obesity and obesity related illnesses, tooth decay etc, hence there is an urgent need to discourage it.
  • Imposing higher taxes will increases the revenue of state and discourage its consumption to certain extent.

Arguments against-

  • By imposing higher demerit tax on high-sugar foods, we may end up taxing Indian sweets and fruit juices at the same rate. The idea of taxing fruit juices at a high rate is dangerous in the India context.
  • India’s food processing industry is tiny and has great scope to grow, bring industry to rural areas and generate diversified employment and improve the lives of farmers. Hence higher demerit tax will become boon to these industries. 
  • Similarly imposing higher taxes other impact like it hurts low income groups, and it may also leads job losses. 

Conclusion-

Any economic decision like imposing taxes has its own positive and negative impact. Definitely excessive usage of sugar drinks has serious health problems, but imposing higher taxes is not the solution. Hence government should discourage the excessive consumption by other means like awareness programmes. Before taking any decision on imposing higher demerit taxes, the impact of it should be examined in the Indian context.


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