Govt Ramps Up Sin Taxes: Why Cigarettes Cost More, Pan Masala Gets Machine Cess

• Union government recalibrates sin-tax framework, increasing excise duty on cigarettes and introducing a machine-capacity-based cess on pan masala.
• Cigarette excise duty was frozen for seven years post-GST, leading to increased affordability and undermining public health goals; new taxes aim to restore revenue buoyancy and public health impact.
• Pan masala sector faced widespread evasion due to high-speed production; machine-capacity-based cess ensures reliable taxation by linking levy to objective parameters like machine speed and pouch weight.
• New cess, unlike GST, can be ring-fenced for specific purposes like public health (cancer/oral care) and national security, without altering GST architecture or allowing input tax credit.
• India's total tax incidence on cigarettes (53%) is still below WHO's 75% recommendation, and the government rejects claims that higher taxes automatically fuel smuggling, citing weak enforcement as the primary driver.

Why It Matters: India revamps sin taxes to boost revenue, protect public health, and curb evasion on cigarettes and pan masala.