What to Read in The Hindu Editorial( Topic and Syllabus wise)

Editorial 1: GST reform and unfinished business in tobacco control

Context

Simplifying tax rates should fix flaws in tobacco taxes while balancing the needs of the economy and public health.

Introduction

As India completes eight years of the Goods and Services Tax (GST) since its launch on July 1, 2017, it is a good time to reflect on this major reform. GST replaced many indirect taxes like VAT, excise duty, and service tax, bringing them under one system. This helped create a unified national market under the idea of “One Nation, One Tax.” The reform made tax rates uniform across states, made it easier to do business, and strengthened economic links between different parts of the country. GST has also become a steady source of income for the government. In 2024–25, the gross GST collections reached a record ₹22.08 lakh crore, showing a year-on-year growth of 9.4%.

• Beyond just collecting revenue, GST has improved economic efficiency.
  • It removed the problem of cascading taxes(tax on tax) by using the input tax credit
    → This helped lower production costs, which benefits both businesses and consumers.
• Compliancehas become easier due to digital systems, such as the e-way bill, making tax filing simpler and helping reduce tax evasion.
• Removing inter-State checkpointshas made logistics faster, cutting transport time by up to 20% and bringing down transport costs.

Faultlines in taxation

Aspect	Details
Public Health Impact	Tobacco use causes over 3,500 deaths daily in India and leads to an economic loss of ₹2,340 billion per year (1.4% of GDP in 2017).
Tobacco Revenue from GST	Average GST revenue from tobacco in the past 5 years is about ₹551 billion annually, which is much lower than the health-related losses.
Tobacco Use in India	India is the second-largest tobacco consumer. Usage includes 28.6% of adults and 8.5% of students (ages 13–15).
Role of Taxation	Globally, higher taxes are one of the most effective ways to reduce tobacco use.
Pre-GST Tax Trend	Between 2009–2017, frequent hikes in excise and VAT led to a 17% fall in tobacco use.
Post-GST Situation	Since GST began, there have been no major tax increases on tobacco. This has made tobacco more affordable, risking a rise in usage again.
WHO Recommendation	The World Health Organization recommends that 75% of the retail price should be tax.
Current Tax Burden in India	– Bidis: 22% tax

• Cigarettes: 54% tax
• Smokeless tobacco: 65% tax
  • All are below WHO standards.

Structural Problems in Tobacco Taxation under GST

1. Heavy Dependence on Ad Valorem Taxes

• GST mostly uses ad valorem taxes(tax based on price).
• But specific excise taxes(fixed amount per unit) are better at reducing harmful product use, like tobacco.
• Ad valorem taxes allow the industry to manipulate prices, reducing the effect of taxation on consumer behaviour.

2. Decline in Central Excise Share Since GST

Tobacco Product	Share of Excise in Total Tax Before GST	Share After GST
Cigarettes	54%	8%
Bidis	17%	1%
Smokeless Tobacco	59%	11%

• The drop in excise sharehas weakened the public health impact of tobacco taxation.
• Many countries with GST/VAT add specific excise taxesto tobacco for health reasons.

3. Inequity in Tobacco Taxation

• Cigarettesmake up only 15% of tobacco users but generate over 80% of tax revenue.
• Bidis, mostly used by low-income groups, are under-taxeddespite being equally harmful.
• Bidis are not coveredunder the GST Compensation Cess, unlike other tobacco products.
• This lack of cess has no health-based justification.

4. Upcoming Threat: Compensation Cess Expiry

• The GST Compensation Cessmay end in March 2026.
• This cess contributes around 50% of total tobacco taxes(especially for cigarettes).
• If withdrawn, it will make tobacco cheaper, hurting public health efforts.

5. Stronger, Smarter Tax Policy

• Raise GST rate on tobacco to 40%, the maximum allowed under GST law.
• Add or increase specific excise taxesto strengthen public health impact.
• Adopt a mixed tax system(both ad valorem + specific excise).
  → Proven to be more effective in:
  • Reducing consumption
  • Increasing tax revenue
  • Avoiding price manipulation

Rethinking Tobacco Taxation Amid GST Reforms

1. Myth of Illicit Trade and Higher Taxes

• The tobacco industryclaims that higher taxes lead to more illicit trade.
• But independent studiesshow that illicit cigarettes make up only 7% to 6.6% of the Indian market.
• This is far lowerthan the industry’s exaggerated claim of 25%.
• Research evidenceindicates that:
  • Tax hikeshave limited impact on illicit trade.
  • Better enforcement, governance, and regulationsmatter more.

2. India’s Global Commitment

• India has signed the WHO Protocol to Eliminate Illicit Trade in Tobacco Products.
• It must now prioritize implementationto close regulatory loopholes and prevent tax leakages.

3. GST Council’s Opportunity: Prioritise Public Health

• As the GST Councilworks on rate rationalisation and structural reform, public health should be a key focus.
• The Parliamentary Standing Committee(139th Report, September 2022) noted that:
  • Tobacco remains highly affordablein India.
  • There is a critical needto raise taxes on all forms of tobacco.

Recommended Strategy for Reform

Suggested Measures	Expected Impact
Raise GST rate on tobacco to 40%	Matches the statutory maximum and helps reduce consumption
Increase specific excise duties significantly	Adds a fixed charge per unit—more effective at reducing use and raising revenue
Continue Compensation Cess or restructure it	Prevents a drop in overall tax burden post-2026
Implement WHO illicit trade protocolfully	Strengthens enforcement and compliance

Why It Matters

• This approach would:
  • Lower health and economic costsof tobacco use
  • Boost fiscal consolidation
  • Show India’s commitmentto both health and developmental goals
• As GST completes 8 years, this is a timely chanceto fix existing gaps in tobacco taxation.
• Doing so would help evolve GSTinto a more powerful tool for public health and fiscal reform.

Conclusion

As GST completes eight years, reforming tobacco taxation is both urgent and strategic. Aligning GST with public health goals through higher rates and specific excise duties can reduce consumption, boost revenue, and curb health costs. With the 2026 cess expiry nearing, the GST Council has a timely chance to fix gaps and reaffirm India’s commitment to health and fiscal responsibility.

 

Editorial 2: In a perilous world, India must read the tea leaves well

Context

The world is changing in ways that may not support India’s traditional policies. It would be wise for New Delhi to be ready for all possible situations and adapt to new global realities.

Introduction

India’s foreign policy is now facing a serious crisis. The return of the Trump administration, once seen as favourable by India, has now disrupted India’s diplomatic strategy. The recent India-Pakistan conflict should act as a wakeup call. With growing evidence of China’s military ties with Pakistan and equipment transfers, India must pay close attention.

• Along with the China-Pakistan alliance, India’s position on West Asia, especially the Israel-Iran conflict, needs a serious re-evaluation.
• So far, Indiahas tried to remain neutral, but this approach has not been very effective.
• With the United States directly involved, the situation has become more serious.
• The U.S. recently used its GBU-57 bunker buster bombfor the first time to target Iran’s nuclear facilities at Fordow, Natanz, and another underground site.
• In this new context, neutrality may no longer be an optionfor India.
• Even though a ceasefirehas been announced, the risk of a full-scale war still remains high.
• India must now rethinkits stand and focus on what best serves its national interest.

A New Phase in the West Asia Conflict

• The use of GBU-57 bunker buster bombsmarks a serious escalation in the Israel-Iran conflict.
• The once-taboo ‘N word’ (nuclear)is now being openly discussed.
• India’s neutralityin such a tense situation is being increasingly questioned.
• This is not just a wakeup call—it’s a global security challengethat demands urgent attention.

India’s Neutrality: Growing Costs and Limited Returns

Issue	Impact on India
Neutral stance on Israel-Iran conflict	Makes India look like an outlier, not an active global player
Global South leadership	Has brought little support during recent crises
India-Pakistan conflict	Showed how India stood alone, despite past regional efforts
China-Pakistan nuclear threat	Both neighbours are hostile nuclear powers, with no moral restraint
Moral diplomacy	India’s equidistance policy has made its moral voice weaker

• India must rethinkwhether neutrality is still serving its national interest.
• With no clear benefitsemerging, it’s time to adjust its foreign policy approach.

US Policy and Rising Tensions with India

• Donald Trump’s MAGA policiesnow hurt India beyond just trade and economy.
• After the May India-Pakistan conflict, Trump claimed credit for the ceasefire—a claim India denies.
• Pakistan’s Field Marshal Munir, however, endorsed Trump’s role, creating a diplomatic imbalance.
• Trump’s warm gesture towards Pakistan, including a lunch with Munir, contrasts with Modi’s silenceon a US visit.
• This risks pushing India and the UStoward a collision course, particularly in global diplomacy.

India’s Israel-Iran Dilemma

• In the Israel-Iran war, India’s middle pathhas made it seem isolated.
• Support for Israelhas not paid off and is now seen as a burden.
• Iran, once close to India, now receives no strong backing.
• India’s balanced approachbetween the two is proving ineffective in today’s geopolitics.

Global Shifts: From Soft Power to Hard Power

Event	Key Message
Shangri-La Dialogue, Singapore	The world is moving from soft power diplomacy to hard power politics
US Defence Secretary’s Speech	Called for a free Indo-Pacific, warned China against military aggression
Chinese Reaction	Asserted that the US must not interfere in Taiwan, warned against provocation

• Consensus buildingis losing ground to military posturing.
• India must now read the global mood correctlyand align its policies with strategic realism.

Key Takeaways and Strategic Imperatives

• India’s neutralityis no longer seen as strength, but as silence or indecision.
• The world is less forgiving, and alliances are being tested in real-time conflicts.
• India must reviewits current foreign policy and prepare for a more polarised, high-risk world.
• To stay relevant, India needs a clear stance, strategic partnerships, and firm diplomatic choices.

Need for Comprehensive Strategic Preparedness

• India must be ready for all kinds of future conflicts, especially after the May India-Pakistan clash, which was only a temporary pause.
• A detailed analysisis needed of the China-Pakistan military alliance, which is growing stronger and more complex.

Understanding the China-Pakistan Defence Integration

Focus Area	Key Concerns
Joint Military Capabilities	China and Pakistan have deep defence links; their militaries are well-integrated.
Use of Chinese Weaponry	Pakistan’s defence depends heavily on Chinese systems and technologies.
Integrated Targeting Systems	Pakistan claims it can lock on to hostile targets, showing advanced integration.
Air Power Details Needed	India must assess the exact numbers and capabilities of JF-17 and J-10C fighter jets in Pakistan’s air fleet.

Learning from Global Best Practices

• Like the UK, which recently reviewed its defence readiness, India too must examine its ability to sustain long-duration wars.
• The UK’s review highlighted:
  • Weak ammunition stockpiles
  • Need for a National Armament System
  • A new Cyber and Electromagnetic Commandfor handling digital and electronic warfare

India’s Defence Upgrades: Priority Areas

• Prepare for a Two-Front Warinvolving China and Pakistan.
• Learn from the Russia-Ukraine war, especially in terms of supply chains, stockpiles, and modern warfare.
• Focus on Artificial Intelligence (AI)for strategic decision-making and battlefield management.
• Strengthen capabilities in:
  • Electro-magnetic warfareto neutralize drones
  • Loitering munitions
  • Glide bombsand modern aerial threats

China’s white paper

• While Indiastays focused on Pakistan, it should also carefully examine China’s recent white paper on “National Security in the ‘New Era’”.
• The document clearly explains China’s current strategic thinking.
• It highlights that “development and security”are like two wings of the same body, showing how closely China links its economy and defence.
• The white paper strongly emphasizes the need to protect scientific and technological security.
• It stresses the importance of stable and secure supply chains.
• It also refers to the situation in China’s neighbouring regions, suggesting that these areas may pose threats to China’s borders.

Conclusion

It is important to note that if China wants to strengthen its strategic goals in Asia, especially in South Asia, its close partnership with Pakistan to surround India should not be taken lightly. At a time when the nuclear threat is being spoken of openly, India must realise that China holds a more than 3:1 edge in nuclear warheads, and nearly a 5:1 edge if China and Pakistan’s nuclear strength is combined.