Lok Sabha Passes Health & National Security Cess Bill; Pan Masala Units To Pay New Levy

The Lok Sabha has passed the Health Security and National Security Cess Bill, enabling the central government to introduce a special cess on pan masala manufacturing units. The bill's approval marks a major fiscal step, with direct implications for the pan masala industry and expanded funding for national security and public health initiatives.

Approved on Friday during the Winter Session of Parliament, the legislation empowers the Centre to levy a new cess on units producing pan masala. Finance Minister Nirmala Sitharaman, while addressing the House, clarified that the revenue collected will be shared with the states since public health is primarily a state subject.

Initially introduced on December 1, 2025, the bill authorises the central government to impose a cess not only on pan masala but also on other products that may be notified in the future. The cess will apply to anyone who owns or controls production machines or carries out manual processes to manufacture the specified goods. Manufacturers must self-calculate the cess amount, file monthly returns, and pay interest if payments are delayed.

For machine-operated units, the cess will vary based on machine capacity-specifically, the maximum number of pouches packed per minute-and the weight of each pouch.
For instance:

A machine producing up to 500 pouches per minute, with each pouch weighing up to 2.5 grams, will be liable for a monthly cess of ₹1.01 crore.

Machines packing 1,001 to 1,500 pouches per minute, with each pouch weighing more than 10 grams, will face a monthly cess of ₹25.47 crore.

Factories that operate entirely through manual production will be required to pay a fixed cess of ₹11 lakh per month.

The bill also grants the government authority to increase cess rates by up to twice the prescribed amount if deemed necessary in the public interest. Any enhanced rate will apply only for a specifically notified duration.