Lok Sabha clears Bill to impose cess on pan masala manufacturing units
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The Lok Sabha on Friday passed the Health Security se National Security Cess Bill, 2025, which seeks to levy a new cess on pan masala manufacturing units to bolster funding for national security and public health.
The bill was approved by voice vote after a debate in which Finance Minister Nirmala Sitharaman underscored the need for a dedicated and predictable revenue stream for these two priority areas.
Sitharaman said the cess will be imposed on machines installed in factories or other production processes used to manufacture pan masala and related products. She clarified that the levy will be shared with state governments, noting that public health falls under state responsibility.
The minister stressed that the cess will not affect Goods and Services Tax revenue, as pan masala is already taxed at the maximum GST rate of 40 percent based on consumption. Instead, the proposed Health and National Security Cess will be collected separately and calculated on production capacity rather than sales.
According to Sitharaman, cess collections as a share of gross total revenue stand at 6.1 percent in the current fiscal year, lower than the 7 percent average recorded between 2010 and 2014. She said the new measure aims to strengthen essential sectors without burdening GST inflows.
The bill is intended to enhance resource availability for both national security initiatives and public health programmes, areas the minister described as central to national priorities.
