By R. Chandra Mouli
One word lit up the Nation on Saturday evening: Ceasefire!
The two countries agreed to a truce and all military operations on land, air or sea stand halted as of 5 pm, May 10. However, the outbreak of unprovoked firing from the Pakistani side the same night was followed by an uneasy calm on Sunday.
Only time will tell if the ceasefire leads to cessation of terror activities. Because peace, while welcome, is a question mark when it comes to Pakistan, as stated by veteran journalists, former diplomats and retired defence top brass.
The onslaught by our missiles and artillery over the last four days has proved that we were in a state of readiness, our arsenal is superior, and our personnel are highly motivated for every mission. The raining of drones by the enemy, and our quick reaction in thwarting them, can also mean lessons have been learned by the other side, and they may work towards refinement of their armory, in preparation for the next round of engagement whenever that may be.
In the light of current circumstances, and despite the ceasefire, we need to increase allocation to our defence budget. I humbly submit there is no time to wait until the next Union Budget.
As a Nation committed to protecting its sovereignty, we are well stocked, hence we are not going to run out of weapons or ammunition in the immediate future. Yet, defence is an expensive exercise. We will likely have to draw upon our exchequer to fund enhancements in the stockpile. Here, we do not fall short… a vibrant economy of the last decade and copious allocation to the defence budget have ensured the availability of financial resources to defend our borders.
Patriotic Images from the Past
If we must implement further upgradation of weaponry, can we minimize dipping into budgeted government funds? There are routes available, and some have proved valuable and viable in the past. A board displayed in the RBI Museum in Kolkata mentions a ‘donation’ by Mir Osman Ali Khan, Nizam VII, to the first ever National Defence Fund (NDF) set up in 1962 during the Chinese aggression.
Contributions came in cash and kind in that era. Responding to an appeal by Prime Minister Lal Bahadur Shastri, several citizens donated gold jewelry to the government. The board affirms that the Nizam of Hyderabad donated over 33,000 gold coins to the Indian government.” Another version says the Nizam invested 425 kg of gold in the National Defence Gold Scheme, launched in October 1965 to tide over the economic crisis.
Can the NDF be used to buy or replenish weapons? No. The intent of National Defence Fund remains the same from the time it was set up in 1962 – to provide for the welfare of members of the Armed Forces (including Paramilitary Forces) and their dependents (https://ndf.gov.in/en/).
The fund is administered by an Executive Committee with the Prime Minister as its Chairperson and Home Minister, Defence Minister and Finance Minister as its Members. Finance Minister is the treasurer of the fund, as per an Office Memorandum issued by the Prime Minister’s Office in October 2016.
This article aims to propose a funding source beyond the NDF and explore ways to bolster the defence budget, without imposing the equivalent of a “war tax.”
The objective becomes relevant when we look back at numerous occasions in which a peace-loving country has been drawn into war (Chinese Aggression of the 60s, Indo-Pak War 1965 and 1971, IPKF engagement in Sri Lanka in the mid-90s and the Kargil conflict of 1999). Each had an economic cost. In the times we live in, wherein our armed forces engage in modern warfare with tactics that are termed as kinetic and non-kinetic, and rely on state-of-the-art computerized weapons, the cost is much higher.
The way world affairs are shaping up, we must continue to invest in defence, whether in a state of truce, war or peace. Here are ways to raise funds without imposing levies on the public. The first two hinge on revenue that is due to the government, yet delayed due to appeals and litigation.
Goods and Services Tax Payments
The indirect and integrated tax is a boon in many ways. However, experts say litigation arises in areas of transition credits, late or non-filing of GST returns, refunds of taxes, the complexity of import and export levies, e-way bill structures, and more. Litigation can also be due to disagreements relating to the interpretation, application, and enforcement of tax laws, the categorization of goods and services, the calculation of tax liability, and the applicability of GST exemptions.
The Central Government, aware of the difficulty caused to well-meaning taxpayers, announced earlier this year a GST Amnesty Scheme which waived interest and penalty to the extent of 100%, subject to overdue amounts being paid within a specified date, and withdrawal of pending appeals filed by the assessee.
The way forward could be launching an all-new dispute resolution scheme that offers liberal discounts, waivers and exemptions on the amount under appeal or litigation, with an unswerving closing date for availing the scheme. A percentage of dues collected in this route, ie. from the amnesty offer, can be allocated to the defence budget.
It must be noted that GST collections (and overdue amounts) are to be shared with the States, hence the Centre will need to take their consent. Cooperation is likely when the matter is presented through the lens of national security.
Unpaid or Underpaid Income Tax
Being another form of tax that is due, the story is similar. The reasons could be different, such as disagreements between the department and assessee over late payment of Tax Deducted at Source, interest accrued on late payment and improper declaration or concealment of income by the assessee.
How much is overdue to the Government of India due to tax-related litigation? As of last year, the amount is over Rs. 12 Trillion according to data quoted by GST Club portal. Design of a structured amnesty scheme could help in reducing the disputed amount and help allocate a percentage of funds for the defence budget.
Unlocking Funds from Overdues
The rationale for apportionment of a percentage from either direct or indirect tax collections can be summarized as follows:
- Government gains immediate cash flow due to the withdrawal of litigation and appeals.
- Valuable time is saved in courts and tribunals.
- The assessor and assessee save on legal expenses.
Some bureaucrats may frown at a scheme in favor of the taxpayer, especially a segment that they believe has erred and therefore been taken to task. To usher in change, to significantly reduce the litigated amount from Rs. 12 trillion, it is worth treading a new path. Let us remember that extraordinary circumstances, such as a neighbour waging a proxy war, warrant extraordinary measures to augment cash flow, in the public interest and national safety.
Surcharge is easy… not innovative
If there is an unexpected and unfortunate break in the ceasefire, and war looms again, officials in the government may ponder the levy of a “surcharge” on taxes to support the defence effort. That’s a plain vanilla approach, whereas our leadership is quite capable of innovative thinking.
Take the concept of Conscription that was announced on May 9, 2025, which empowers the Army to absorb officers, if need arises, from the Territorial Army. In making this announcement, the Government proved it can innovate and mobilize resources that are ready to deploy.
Redirecting a Portion of CSR Funds
The need for CSR allocation has been well defined for corporates in Section 135 of the Companies Act, and the law requires a spend of minimum 2% of net profit. The Government can introduce an additional one percent for defence. Even if deemed voluntary, listed entities engaged in business or industry are sure to rise to the occasion as they would view it as part of their social responsibility to help sustain peace.
A New Script for the Entertainment Industry
Indian cinema is now screened at the global level, and box office collections exceed Rs. 1,000 crores in the case of blockbusters. The production houses could make a voluntary contribution, as a pre-agreed percentage of earnings to the defence budget, in addition to a contribution they may wish to make to the NDF.
Naming the Fund and Switching to Action Mode
What should we call this Fund? Being a former advertising professional, I suggest the following: National Security Fund (NSF), India Defence Initiative (IDI) or Bharat Ka Kavach (BKK).
Once the name is finalized, it could be formalized either by a Special Resolution, an Act of Parliament, or by passing of an Ordinance. If you look back at the pandemic, the ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES) was set up in 2020 as a public charitable trust. The dedicated fund has the primary objective of dealing with any kind of emergency or distress situation, such as the COVID-19 pandemic, and providing relief to the affected.
The fund source for PM CARES is by way of voluntary contribution, whereas the proposed defence fund will be a blend of donation and apportionment from overdue and (un)resolved tax collections.
The attendant benefits for individual taxpayers and corporates can be outlined in the intent and scope. Working at the pace it is known for, the Government could swiftly initiate a print and digital campaign to create visibility among the target segments which in turn will promote benefits in avoidance of tax litigation, reignite the patriotic spirit of corporates in CSR and motivate the film fraternity to donate to the newly formed Fund.
To create the initial corpus, contributions can be welcomed from companies already engaged in Defence Manufacturing under ‘Make in India,’ and from domestic entities aspiring to enter this vital vertical.
We have successfully overcome a testing phase for the Nation and its leadership. We have countered every move by the enemy at the gates. In the wake of the ceasefire, every step we take, every thoughtful and timely action we embark on, can help protect our citizenry. It’s time to innovate and create an all-new fund such as ‘India Defence Initiative.’ Jai Hind!
(The writer is a former journalist and advertising professional now serving as a communications consultant)
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