NEW DELHI: Union Finance Minister Nirmala Sitharaman on Thursday moved The Health Security se National Security Cess Bill, 2025 in Lok Sabha for consideration and passing in the Lok Sabha.
Speaking in the Lok Sabha, “I rise to move that the bill to augment the resources for meeting expenditure on national security and for public health and to levy assess 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.”
Elaborating on the rationale behind the bill, Sitharaman further added, “A cess is being imposed because the GST system taxes consumption, and even today pan masala is taxed under GST at 28 per cent plus compensation cess. Since the compensation cess is going to end, that portion will shift into a 40 per cent cess. However, many types of pan masala still do not fall under the tax net because GST is applied on the basis of consumption. Under GST, there is no tax based on production capacity or output. That is why tobacco is taxed under GST and was also brought under excise duty recently.”
“Excise taxes production. But pan masala cannot be taxed on production because it is not classified as an excisable product. So, while cigarettes were brought under excise duty and ideally pan masala should have been included too, it cannot be added because it is not in the excise category. Therefore, cigarettes now face excise duty as they should, with more than 40% tax so they are not cheaply available but pan masala cannot be taxed this way. Hence, through the new law, the government is imposing a production-based tax in the form of a cess,” the Finance Minister said.
Sitharaman said the Bill is intended to create a dedicated predictable source of resource for two domains of national importance- health security and national security.
“Given the signifant health burden generally for all govts, central and state that arise out of consumotion of demerit goods like pan masala and the second domain pertains to National security needs sustained to keep pace with evolvong security needs,” she said.
She said that the cess will not be placed on any essential commodities but only on demerit goods, which are associated with significant health risks.
“We want to impose such a cost as a deterrent”, the Union Minister said.
