Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during the Winter session of Parliament, in New Delhi, on December 5, 2025. Photo Credits: Sansad TV via PTI
The Lok Sabha on Friday (December 5, 2025) passed a Bill which would levy a special cess on pan masala and use the fund for improving public health and strengthening national security. The ‘Health Security se National Security Cess Bill’, 2025, will introduce a new cess that replaces the existing Compensation Cess under the GST framework.
Union Finance Minister Nirmala Sitharaman said, “The cess will be shared with the States, as public health is a State subject.”
Replying to the debate on the Bill before it was passed by a voice vote, Ms. Sitharaman said, “Pan masala will be taxed at the maximum 40% rate under Goods and Services Tax (GST) based on its consumption, and there will be no impact of this cess on GST revenues.”
The primary intent behind the newly introduced Health Security (National Cess) Bill, 2025, is to levy a tax specifically on the production capacity of pan masala, a category the government says cannot be effectively brought under the conventional excisable regime, the Finance Minister had clarified on Thursday (December 4, 2025).
On Friday (December 4), she said the Bill intended to augment the resources for meeting expenditure on national security and for public health by levying a cess on the machines installed or other processes undertaken to manufacture pan masala and similar goods.
The purpose of the Bill is to create a “dedicated and predictable resource stream” for two domains of national importance – health and national security– she said.
The proposed Health and National Security Cess, which will be over and above the GST, will be levied on the production capacity of machines in pan masala manufacturing factories. Initially, the Bill applies to pan masala; however, the government may notify to extend the cess to other goods, if necessary.
Ms. Sitharaman added that the cess as a percentage of gross total revenue was 6.1% in the current fiscal, lower than 7% between 2010 to 2014.
Published – December 05, 2025 09:41 pm IST
