Revenue over health: The gutka cess debate

Pan masala and gutka are words familiar to every Indian, even to those who never touch the products. In North India, government buildings and staircases stained with their tell-tale marks bear silent testimony to their widespread use.

Pan masala is truly ubiquitous — sold at every corner shop, splashed across billboards with celebrity endorsements, and promoted on television as a lifestyle product.

Yet behind this glossy veneer lies a harsh reality. Laced with tobacco and several harmful additives, pan masala is a carcinogenic concoction freely available in the Indian market. Its consumption has only risen over the years, driven by low cost, easy accessibility, and its highly addictive nature. The industry itself is a heavyweight. India’s pan masala market was valued at approximately `46,682 crore in 2024, and projections suggest it may reach nearly `64,446 crore by 2033, growing at a CAGR of 3.60 per cent. The new cess, applicable not on the final product but on the machinery and processes used to manufacture it, effectively tightens the net around the gutka-pan masala industry. By linking the cess to machine speed, weight per pouch, and manufacturing capacity, the bill closes loopholes, reduces evasion, and ensures a predictable stream of funds for national security and healthcare initiatives. The government’s proposal to levy a new cess on machines used for manufacturing pan masala under the ‘Health Security se National Security Cess Bill, 2025’, though welcome, has reignited an old public health debate: Is taxation enough to discourage harmful consumption, or should the state simply ban such products altogether? At the heart of this discussion lies a contradiction — while the government cites health concerns, it continues to generate substantial revenue from the very substances it claims to discourage and is not interested in banning them altogether as it would lose a substantial amount of revenue. But the big question is — Is earning revenue at the cost of public health acceptable? Another concern is that increasing the cess on manufacturers will inevitably raise production costs, leading to higher retail prices. But past experience shows that higher prices rarely translate into lower consumption; demand for these products continues to grow regardless of cost. What is worse is that small manufacturers start selling even more, as they are not in the tax net and work with second-hand machines and low-grade ingredients that are even more harmful. India collected `19.4 lakh crore in various cesses over five years, and the new framework ensures that “sin goods” continue to be taxed heavily.

From the government’s standpoint, this is both a revenue-stabilising measure and a public health intervention. If gutka and pan masala are so harmful — being among India’s leading causes of oral cancer — why not ban them outright? The government cannot simultaneously position itself as a guardian of public health and earn from a substance that is unquestionably a health hazard. Cess risks creating a parallel economy where illicit and unregulated products flourish, posing even greater health risks.