Finance Minister Nirmala Sitharaman introduced the Health Security se National Security Cess Bill, 2025, proposing a cess on machines used for manufacturing pan masala.

• The Bill has been introduced as a Money Bill, requiring only Lok Sabha approval.

Key Provisions of the Bill

• Cess on Manufacturing Machines: The Bill proposes a cess on all machines installed or processes undertaken in manufacturing pan masala, including fill-and-seal machines and packing machines.
• Basis of Cess Calculation: Cess will depend on Number of pouches/tins/containers produced per minute and Weight of pan masala per pouch (2.5 g to >10 g)
• Self-Declaration: Taxpayers must self-assess the cess, file monthly returns, and pay interest on delayed payments.
• Offences and penalties: Offences include undeclared machines or processes, failure to pay cess, failure to register, and tampering with seized goods.
• State Allocation for Health: A portion of the cess revenue will be shared with states to support health awareness programmes and health-related government schemes.
• Audit: Commissioners or higher-ranked officers may audit manufacturers to verify cess payments. They may launch recovery proceedings for unpaid cess, interest, or penalties.

Scope of the Proposed Cess

• Applicability: The cess will not be levied on essential goods, instead it will apply only to selected demerit goods that pose significant health risks, such as pan masala.
• Liability: Liability falls on anyone who owns or controls machines or manual processes used to manufacture these goods.

Objectives Behind the Cess

• Funding National Priorities: The Bill aims to generate dedicated financial resources for national security and public health, both of which involve increasing expenditure needs.
• Revenue Predictability: Linking the cess to demerit goods is intended to ensure predictable and accountable funding for these priority areas.
• Deterrence Through Taxation: The cess seeks to discourage the use of lifestyle-related harmful products by imposing a targeted financial burden on them, similar to the logic behind sin taxes.

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