New Delhi: Finance Minister Nirmala Sitharaman on Monday moved two new bills in the Lok Sabha that look to repurpose levies on ‘sin goods’ such as tobacco, pan masala, and related products ahead of the scheduled phaseout of the GST compensation cess levied on them.
The Central Excise (Amendment) Bill seeks to levy excise duty on tobacco and related products, while ‘The Health Security se National Security Cess Bill, 2025’ would be applicable on the manufacturing of pan masala and other goods that the government may notify.
The bills, introduced amid din in the Lok Sabha as Opposition members protested, demanding a discussion on the Special Intensive Revision (SIR) of electoral rolls, may be taken up for discussion in the House on Tuesday.
“It will augment the resources for meeting expenditure on national security and for public health, and to levy a cess for the said purposes on the machines installed or other processes undertaken by which specified goods are manufactured or produced, and for matters connected therewith or incidental thereto,” FM Nirmala Sitharaman told Parliament.
The Central Excise Amendment Bill, 2025, seeks to replace the GST compensation cess currently imposed on all tobacco products, including cigarettes, chewing tobacco, cigars, hookahs, zarda, and scented tobacco. Meanwhile, the Health Security se National Security Cess Bill, 2025 seeks to levy a cess on the production of specified goods, such as pan masala.
What changes do the new Bills make to your tobacco and pan masala purchases?
- The Central Excise Amendment Bill, 2025, aims to “to give the government the fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence,” once the GST compensation cess ends, according to the Bill, as quoted by news agency PTI.
- After the Bill is passed in Parliament, the new law will principally reorganise the taxation of tobacco products by replacing the existing Goods and Services Tax (GST) compensation cess with a new central excise duty. The overall tax burden on these products is intended to stay the same, ensuring revenue neutrality for the government.
- The second Bill proposes a cess on machines installed or processes undertaken for the manufacture or production of specified goods, including pan masala and gutkha, according to a report by ANI.
“The Health Security se National Security Cess Bill proposes to levy cess on the machines installed or processes undertaken by which the specified goods, namely, pan masala, is manufactured or produced, whether manually or through hybrid processes,” as per the Bill.
