“We need resources, and they don’t come cheap,” Finance Minister Nirmala Sitaraman said on 6th December 20in the parliament, as Lok Sabha passed the Health Security to National Security Bill. It’s a bold move to tax Pan Masala production and drive funds towards defence and public health. This bill introduces the cess on Pan Masala- a popular addictive betel nut chew which is linked to oral cancer mainly, and this also aims to sustain high taxation as GST compensation ends.
Without it, experts warn that the product’s tax rate could dive from 88% to just 40%. Mainly, this comes under the top tax slab of demerit goods, and hence, it’s cheaper production will spike the consumption, worsening the already deteriorating health system of India.
The GST compensation cess
The GST compensation given for transition pains in 2017 for the state and is about to expire. Pan Masala has been notorious for tax evasion, thus it is an attractive target for revenue. Since 2014, the state collected about 6 lakh crore INR and has freed about 6.4 lakh INR towards states, representing cooperative federalism management.
This bill also revives painful memories, particularly during the UPA Era when soldiers were having a shortage of boots or ammunition in harsh Himalayan regions. Funding gaps for post-Bofor scandal artillery procurements were stalled. With this bill, the finance minister promises to avoid such lapses, more so in the modern era, where precision in weapons is an imperative need of the hour, besides drones and cyber defense.
The cess has created a revenue stream that is predictable, dedicated, and direct for initiatives such as “Operation Sindhoor” and “Mission Sudharsanchakra.” Those are about protecting critical infrastructure from the threats to repel against aggressors. In 2025-2026 alone, the defense budget would have been capital-intensive, in which space and autonomous systems havecost billions.
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Sin tax model mirrors global health financing practices
It reflects the sin taxes across the globe also. In the UK, the tobacco tax is used for funding the NHS. This also led to cutting down smoking rates by 20% there. As per WHO data, even tobacco cess has halved the consumption in some states. However, critics say pan masala users are often from low-income levels; they shouldn’t be burdened with national costs. This started a debate about regressive taxes.
According to economist Arun Kumar, while innovative, such targeted levies must balance revenue with equity; otherwise, they are in danger of worsening the social divide, much like the debates surrounding Brazil’s sugar drink tax.
Beyond defense, this also aids in health by containing pan masala health tolls, which claim thousands of lives via cancer. Its collection will drive toward the states fostering federal spirit. The government has given relief to income tax slab rates on their daily goods-a generous package since 1947. This could inspire similar models for climate and education, even. The policymakers need to monitor evasion and health outcomes to ensure it delivers effective results.
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