The Central Excise (Amendment) Bill will levy excise duty on tobacco and related products, while ‘The Health Security se National Security Cess Bill, 2025’ would be applicable on manufacturing of pan masala and other goods, which the Centre may choose to notify later.
While the revenue from levy of excise on tobacco would be part of the divisible pool of tax revenues, which is shared with states, health and national security cess would go towards funding public health initiatives and national security.
The bills are likely to be taken up for discussion in the House on Tuesday as the day’s proceedings got disrupted in the parliament due to opposition protests over the Special Intensive Revision (SIR) exercise.
Experts said the bill, which seeks to levy excise duty on cigarettes and cigars at ₹5,000-11,000 per 1,000 sticks, and a levy of 60-70% on unmanufactured tobacco, and 100% on nicotine and inhalation products, will increase the taxation rate on these items beyond the 40% GST rate.
Currently, tobacco and pan masala attract 28% GST and compensation cess.
The bill also shifts taxation on pan masala to be based on production capacity, rather than output quantity-a fixed monthly levy based on machine speed and pouch weight, to address revenue leakage in the sector.
“For businesses, this translates into higher fixed costs, enhanced compliance requirements, and the need for meticulous planning and documentation,” said Sivakumar Ramjee, executive director-indirect tax, Nangia Group.
The timeline on the effective date of implementing the new bills will hinge on repaying the existing loans on the compensation cess.