India needs a ‘defence cess' to fund military modernisation

The Hindu

2 days ago

In a world increasingly defined by stealth drones, hypersonic glide vehicles, and algorithmic warfare, India cannot afford to rely on ageing jets, delayed imports, and peacetime assumptions. Defence Minister Rajnath Singh has said peace is nothing but an illusion, and India must be prepared for any uncertainty. Unfortunately, the only certainty in the current geopolitical scenario is uncertainty.
With India's stance on the Indus Water Treaty and clear policy of treating every future terror attack as an act of war, the frequency of confrontations with Pakistan will only rise. As witnessed in the previous two confrontations, air power will again take centre stage. But the strategic context will be even more challenging. Pakistan is set to acquire the J20 or J35 stealth aircraft from China. China itself is experimenting with sixth-generation prototypes. India, in contrast, remains nearly a decade away from deploying its own fifth-generation platform.
The Indian Air Force today operates 32 squadrons as against the sanctioned strength of 42. While India's combat aircraft are competent, capability alone is not enough. In an increasingly contested and complex airspace, the country cannot afford to be vulnerable.
Therefore, modernising India's armed forces as a whole, especially the Air Force, is no longer aspirational. It is existential. From indigenous engine development to electronic warfare systems and strategic drone fleets, the road map is clear. What remains uncertain is not the intent but the pathway to sustained and ring-fenced funding. The Indian economy has the size and strength to support this. But money without direction and foresight without political will and execution is futile.
Poor pace, no priority
A significant portion of government spending today is absorbed in routine expenses. What is left is often spread thinly across fragmented schemes and incremental projects. The result is that capital acquisition for defence lacks pace and priority. Numbers may appear large on paper, but intent should be measured not in allocations, but outcomes.
Hence, what is required is a distinct and emotionally resonant defence cess as a standalone national contribution dedicated to strengthening India's defence preparedness. This will not be a tweak to the existing GST regime, but an independent instrument reflecting the country's collective commitment to its armed forces.
This cess will mean a 5-10% surcharge on ultra-luxury services and ultra-luxury goods such as high-end cars, imported jewellery, private jets, premium liquor, and other similar indulgent purchases. Unlike existing indirect taxes, this amount will be clearly itemised on invoices as a 'Raksha cess', making it transparent and distinct from the GST framework.
The idea is to introduce a visible and voluntary contribution from those engaging in luxury consumption and direct it specifically towards strengthening national defence. It may also blend privilege with purpose which can allow consumers to take part in nation-building by aligning their spending with a larger sense of responsibility.
Historically, nations have aligned consumption with contribution. Italy imposed targeted luxury taxes during the Eurozone crisis, linking helicopter and yacht ownership to fiscal solidarity. Sweden continue to use luxury taxation as a subtle expression of economic justice. China went further, turning its anti-extravagance campaign into a national redirection of capital toward strategic industries.
Consumption and commitment
In the Indian context, this approach will offer a unique psychological and fiscal advantage since it will allow the affluent to contribute to national defence through visible and voluntary patriotism. It will send a message that high-end consumption can coexist with high-end commitment. For the wider public, it will create a moral narrative that those who have benefited the most from India's rise are also visible contributors to its security.
It is imperative to note that the strength of the cess will lie not only in its size but also in its clarity. It will be transparent, targeted, and morally intuitive. Most important, it may lead to a behavioural shift. Spending on luxury becomes a visible public act of support for the armed forces. The premium one will pay on a sports car or designer watch will not disappear into a black hole of budget lines. Rather it will be utilised to build the engine of a new fighter jet or fund the software in a new air-defence system.
However, implementation must match intent. The cess must be non-lapsable, transparently governed, and explicitly earmarked for capital expenditure in defence. Every rupee collected must be traceable to procurement, research and development, and modernisation. Over time, the cess may evolve from a tax instrument to a national pride programme.
This idea may or may not make sense at the moment. But it is time for India to now move from mere accounting, to imagination. India stands at a point where narrative matters, and the cess allows an intersection between narrative and mission to take shape in a manner that is financially sound, politically non-disruptive and socially unifying.
India has the means. What it needs is the mechanism. And a message that every luxury comes with legacy, and every indulgence can inspire protection.
Sidharth Kapoor is a lawyer and public-policy enthusiast; views are personal