Health Security se National Security Cess Bill, 2025

5 Dec 2025

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.

Cess (Article 270)

It’s a specific levy imposed for a particular purpose or cause.
To raise funds for a specific purpose, such as education or health
Imposed as an additional charge on taxes, such as GST, income tax, etc. (Cess is levied on everyone)
Calculation Basis: It’s calculated on the total tax amount plus the applicable surcharge.
Accounting: Added to the Consolidated Fund of India but can only be spent for specific purposes.
Tax Sharing: Center not obligated to share with the States

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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Tobacco Use in India

High Tobacco Prevalence: According to Global Adult Tobacco Survey(GATS)-2 data, nearly 42% of men and 14% of women in India use tobacco.
- India is home to 70% of the world’s smokeless tobacco (SLT) users, where SLT is preferred over smoked tobacco.
Health Impact: Smokeless and smoked tobacco significantly raise cancer risks; India ranks first globally in male cancer deaths.
Economic Burden: Along with the health burden, tobacco use imposed an economic cost of ₹1.77 lakh crore (1.04% of India’s GDP) in 2017-2018.
Regulatory Framework:
- Gutkha ban largely ineffective due to industry influence and widespread availability.
- WHO recommends 75% tax on MRP; India falls short.
- 87% of cigarette vendors sell single sticks, a practice banned in 88 countries.

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