FM: Tobacco 'evasion-prone', 40% GST not enough for cess

• Finance Minister Nirmala Sitharaman defended the Health Security and National Security Cess Bill, 2025, in Lok Sabha.
• The cess targets demerit goods like tobacco and pan masala, with proceeds allocated for public health and national security, particularly defence funding.
• Sitharaman stated the tobacco sector is "highly evasion-prone," making even a 40% GST rate insufficient, and defended the production capacity-based levy.
• She emphasized the need for flexibility to tax new pan masala variants and prevent reduced tax incidence after the compensation cess expires.
• The FM clarified there is no intent to encroach on the GST Council's domain, and Parliament's authority on taxation remains intact.

Why It Matters: New tax on tobacco/pan masala secures defense funding and public health.