Lok Sabha Passes Health and National Security Cess Bill 2025 on Pan Masala Units

Lok Sabha Approves Health Security and National Security Cess Bill 2025

The Lok Sabha has passed the Health Security and National Security Cess Bill, 2025 , introducing a targeted cess on pan masala manufacturing units . The measure aims to create a dedicated revenue stream for strengthening India’s public health architecture and national security preparedness—two sectors identified as long-term strategic imperatives.

Purpose Behind the New Cess

The bill proposes a levy on the production capacity of machines used to manufacture pan masala and related products. Unlike a retail-based tax, this mechanism ensures predictable revenue collection while reducing the possibility of under-reporting. According to the government, funds generated will reinforce critical national security programmes and help states address public health challenges, especially those linked to tobacco and smokeless products.

Revenue Sharing and State Involvement

Finance Minister Nirmala Sitharaman clarified that states will receive a substantial share of the cess proceeds since public health is a state subject . She emphasised that the cess does not affect GST revenues—reinforcing that the GST rate on pan masala remains capped at 40% , the highest permissible slab.

This arrangement ensures that states retain fiscal space while benefiting from additional central support for health initiatives.

How the Cess Works

The levy is based on machine capacity rather than market turnover. This:

• Ensures stable, predictable collections

• Prevents leakage from under-invoicing or informal sales

• Aligns with earlier successful models used for similar high-risk goods

The minister also noted that cess collections currently account for 6.1% of gross revenues—lower than levels recorded between 2010 and 2014—indicating manageable fiscal impact.

Exam-Oriented Facts

• Bill Passed: Health Security and National Security Cess Bill, 2025

• Cess Basis: Levied on machines used in pan masala production

• Purpose: Funding national security and public health

• GST on Pan Masala: Remains capped at 40%

• Cess Share in Revenue: 6.1% of gross total revenue (current fiscal)

Broader Policy Significance

The new cess reflects a strategic approach to fiscal policymaking—drawing resources from a product linked to significant health burdens and channeling them into national priorities. The government aims to build sustainable funding pipelines for defence readiness and health-sector strengthening without altering GST structures. The move is positioned as both a public health measure and a long-term investment in India’s security ecosystem.