Lok Sabha passes – The Lok Sabha on Friday (December 5, 2025) passed a bill that will impose a special cess on pan masala and use the funds to improve public health and strengthen national security. The ‘Health Care to National Security Cess Bill’, 2025, will introduce a new cess that will replace 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.

” Responding to the debate on the bill before it was passed by voice vote, Ms Sitharaman said, “Pan masala will be taxed at a maximum rate of 40% under the Goods and Services Tax (GST) depending on its consumption, and there will be no impact of this cess on GST revenue. ” The primary objective behind the newly introduced Health Security (National Cess) Bill, 2025 is to specifically tax the production capacity of pan masala, a category which the government says cannot be effectively brought under the traditional excisable regime, the Finance Minister had clarified on Thursday (December 4, 2025). On Friday (December 4), he said the bill aims to raise resources to meet expenditure on national security and public health by imposing a cess on machines or other processes installed for manufacturing pan masala and similar items.

He said the bill aims to create “dedicated and predictable resource flows” to two areas of national importance – health and national security. The proposed Health and National Security Cess, which will be in addition to GST, will be levied on the production capacity of machines in pan masala manufacturing factories.

Initially, the Bill applies to pan masala; However, if necessary, the government may issue a notification to increase cess on other items also. Ms Sitharaman said cess as a percentage of gross total revenue in the current financial year was 6.

1%, down from 7% between 2010 and 2014.