The first-of its-kind move in the country was recently announced in the maiden budget of the CPI (M)-led LDF Government in Kerala presented by Finance Minister Dr. T.M. Thomas Issac. It proposed tax on foods or drinks judged to be unhealthy and whose consumption is believed to be linked to rising obesity levels. It is similar to the sin tax imposed on items such as alcohol or tobacco to discourage their consumption.
The idea for this initiative was generated when during pre-budget discussions, suggestions were asked from the public and they demanded to do something about fast foods, especially big brands such as Dominos, Pizza Hut, McDonald’s etc. The fat tax’s major concern is with issues related to public health over revenue generation.
The revised state budget for 2016-17 expects the ‘Fat tax’ will add an additional Rs.10 crore to the state coffers. The revenue impact of the fat tax will be modest, but it could have a big impact nationwide on the food industry if other states follow suit. Multi-national fast food chains like McDonalds, Pizza etc. are set to be hit on the back of the new tax imposition.
Companies will pass on this tax partially or fully to the customer which may make the customer cut back on pizzas and burgers. Critics believe that imposing the tax is not going to change consumption patterns but will have an impact on the volume of such food products sold. It will discourage junk food and play some role in healthy lifestyle of people as Kerala has one of the highest numbers of patients of diabetes or hypertension in the country caused due lifestyle changes. The state government hopes that this tax may certainly be a disincentive to the massive change in lifestyles of those suffering from obesity, and other related health problems.
Fat tax on junk food was imposed in European countries such as Denmark and Hungary. Denmark, however, scrapped it later.
However, the Indian southern-most state isn’t the first state to impose so-called Fat tax. In January 2016, Bihar government decided to impose a 13.5% value-added tax (VAT) on items such as salted peanuts, samosas, sweets and a few branded snacks.