New Delhi: The Lok Sabha on Friday approved a crucial bill aimed at imposing a cess on pan masala manufacturing units, with the revenue earmarked to bolster India’s national security and public health infrastructure.
Replying to the debate on the Health Security se National Security Cess Bill, 2025, Finance Minister Nirmala Sitharaman said the proceeds from the cess would be shared with the states, noting that public health falls under the state government’s jurisdiction. The bill was subsequently passed through a voice vote in the lower house.
According to the legislation, the cess will be levied on machines installed or on other manufacturing processes used to produce pan masala and related goods. The government said this measure is intended to “augment resources” required for two vital sectors—national security and public health.
Sitharaman explained that the core purpose of the bill is to establish a “dedicated and predictable resource stream” for these two areas of national importance.
She clarified that pan masala will continue to attract the maximum 40% Goods and Services Tax (GST) based on its consumption. The newly introduced cess, however, will be imposed over and above GST and will be calculated based on the production capacity of machines used in pan masala manufacturing factories. Importantly, she emphasized that this cess will not affect GST revenue collections.
Providing additional context, the Finance Minister noted that cess collections as a percentage of gross total revenue stand at 6.1% in the current fiscal year—lower than the 7% average recorded during 2010–2014.
The passage of this bill marks a significant step by the government to secure more stable funding for sectors that directly impact the nation’s health security and defense preparedness.