India's Lok Sabha Passes Health and National Security Cess Bill on Pan Masala Production

Finance Minister Nirmala Sitharaman announced that the newly approved cess will be distributed among states.

New Delhi:

On Friday, the Lok Sabha approved legislation to impose a cess on pan masala manufacturing facilities, with proceeds designated for enhancing national security and improving public health initiatives.

During the discussion on the Health Security se National Security Cess Bill, 2025, Finance Minister Nirmala Sitharaman clarified that the cess revenue would be shared with states, acknowledging that public health falls under state jurisdiction.

The Lok Sabha subsequently passed the bill through voice vote.

This legislation aims to generate additional resources for funding national security operations and public health programs by imposing a cess on machinery and manufacturing processes used in the production of pan masala and similar products.

Sitharaman emphasized that the bill's primary objective is to establish a "dedicated and predictable resource stream" for two nationally significant sectors - health and national security.

The Finance Minister stated that pan masala would continue to be taxed at the maximum 40 percent rate under the Goods and Services Tax (GST) based on consumption patterns, while clarifying that the new cess would not affect GST revenue collection.

The proposed Health and National Security Cess, which will be implemented in addition to existing GST obligations, will be calculated based on the production capacity of equipment in pan masala manufacturing facilities.

Sitharaman further noted that cess as a percentage of gross total revenue stands at 6.1 percent in the current fiscal year, which represents a decrease from the 7 percent recorded between 2010-2014.