Union Finance Minister Nirmala Sitharaman on Thursday introduced the Health Security and National Security Cess Bill, 2025 in the Lok Sabha, seeking its consideration and passage. The proposed legislation aims to generate additional resources for national security expenditure and public health initiatives by levying a cess on machinery or processes used in the manufacture of specified goods.
Presenting the bill, Sitharaman said, “I rise to move that the bill to augment resources for meeting expenditure on national security and public health, and to levy a cess on machines installed or other processes undertaken for the manufacture or production of specified goods, and for matters connected or incidental thereto.”
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Explaining the need for the new cess, the Finance Minister noted that the GST regime taxes consumption rather than production. She pointed out that pan masala is currently taxed at 28% under GST along with a compensation cess, but with the compensation cess set to expire, the tax component would shift to a 40% cess. Despite this, several categories of pan masala remain outside the tax net due to GST’s consumption-based structure.
Sitharaman added that unlike cigarettes—which are taxed under GST and have also been brought under excise duty—pan masala cannot be taxed on the basis of production because it is not classified as an excisable product. “Cigarettes now face excise duty, as they should, with over 40% tax to prevent cheap availability. But pan masala cannot be taxed similarly. Hence, through this new law, the government is introducing a production-based tax in the form of a cess,” she said.
The bill seeks to close this gap by ensuring that products such as pan masala are subjected to a more robust and production-linked taxation framework, thereby strengthening revenue streams for critical national priorities.
(This story is published from a syndicated feed)
