Health

Could food taxation in India pave the way to better health?

By cpstestersofficial@gmail.com · August 5, 2026 · 5 min read

Indian street sellers selling vegetables on the streets of The Pink City in Jaipur, Rajasthan, India. Jaipur is known as the Pink City, because of the color of the stone exclusively used for the construction of all the structures. — Image: © hadynyah | iStock

Dr Jingmin Zhu and Professor Franco Sassi from Imperial Business School in the UK examine whether food taxation in India could lead to improved health

The growing burden of unhealthy diets in Asia

Diets are changing in many Asian countries under the pressure of trade globalisation, rising incomes, and expanding food manufacturing industries.

The consumption of foods high in fat, sugar, and salt is increasing rapidly. These foods are often highly industrially processed and are therefore called ultraprocessed foods (UPFs).

In 2023, UPFs accounted for 37% of the packaged food market in India, following a 13% annual increase in sales over the previous decade. ⁽¹⁾ A survey conducted by the South Asia Biobank over 2020–2022 found that 75% of participants in North India and 41% in South India had consumed UPFs in the previous day. ⁽²⁾ An earlier national survey had found that 36% of adolescents in India ate packaged salty snacks and 22% drank sugar-sweetened beverages at least once a week. ⁽³⁾

The health consequences are already visible. Unhealthy diets have driven increases in body weight and a higher risk of obesity and non-communicable diseases, including heart disease, diabetes and stroke. Importantly, the elevated risk of metabolic diseases occurs at a lower body weight in Asian populations than in Western ones, due to a typically higher percentage of body fat at equivalent weight. Thus, the impact of an unhealthy diet may be comparatively higher in Asian countries.

The importance of food environments

While each person can make their own food choices, the choices they ultimately make are heavily influenced by the environment in which they are made.

Key characteristics of the food environment include, for instance, where food outlets are located and what types of outlets are in closer proximity to where someone lives or works. Food advertising is also a key dimension of the food environment, as are the ways foods are displayed in stores, the images and messages conveyed on food packages, and food prices.

Studies led by the Centre for Health Economics and Policy Innovation at Imperial Business School in Bangladesh, India, Pakistan and Sri Lanka show that healthier food environments are key to improving diets and preventing non-communicable diseases.

A study of government policies to improve food environments in those four countries found that implementation is often weak, with most existing policies focusing on food safety, hygiene and undernutrition rather than the prevention of obesity and diet-related diseases.

There is significant scope to improve front-of-pack nutrition labels, restrict the marketing of unhealthy foods, implement fiscal measures such as taxes on unhealthy products and subsidies for healthy foods, and establish nutrition standards in schools.

Can food taxation help?

Fiscal policies are rapidly gaining recognition as effective approaches for improving diets. Taxing foods that are high in fat, salt, and sugar raises the price of unhealthy foods and reduces demand for them. In doing so, it nudges consumers toward healthier alternatives, lowers the risk of obesity and metabolic diseases, reduces the associated healthcare and social costs over time, and generates public revenue.

For instance, India’s Goods and Services Tax, introduced in 2017, already applies differentiated rates to food and beverage products, currently ranging from 0 to 40%, with the latter rate being applied to ‘sin goods’. Processed foods are taxed at 18%, and high-sugar and carbonated soft drinks at 40%. ⁽⁴⁾

However, many products aside from sweetened beverages are not included in this top tier and are therefore taxed at moderate rates that do not adequately reflect their impact on health. The rationale for increasing tax rates more broadly on foods high in fat, sugar, and salt is compelling on both health and economic grounds.

What will food taxation achieve?

A modelling study offers the most comprehensive assessment of what taxing ultra processed foods could achieve in India. Using data from over 260,000 households in the dynamic simulation model Health-GPS, we modelled the health and economic impacts of raising the tax on these products to 40%.

Such a policy could reduce new cases of major chronic diseases by up to 1.7% per year, with a gain of 0.6 million years of life in good health per year, by reducing BMI and sodium intake (via salt).

According to our research, total health expenditure savings could reach US $601 million annually. Crucially, the fiscal impact on households would be modest. Household average food spending would rise by around 1%, while government tax revenue from foods and beverages could increase by as much as 92%. For lower-income households, reductions in healthcare costs could largely offset any increase in food expenditure.

Complementary policies, such as subsidies on fruits, vegetables, and legumes, would ensure that the burden of taxation doesn’t disproportionately affect lower-income households.

Food taxation policy was identified as a key policy gap in four South Asian countries, alongside other policies. Although countries operate different value-added tax systems distinct from India’s GST framework, adjusting existing tax tiers to apply a higher tax rate to HFSS foods would be feasible and could achieve both health and economic benefits.