Will a New Levy on Tobacco and Pan Masala Replace GST Cess?
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Synopsis
The Indian Government moves to introduce new legislation to replace the GST cess on tobacco and pan masala with an excise levy. This aims to secure funding for public health and national security, while keeping taxes on these sin goods at current levels. The session will also address multiple other bills.
Key Takeaways
- The Central Excise Amendment Bill, 2025 aims to maintain high tax levels on tobacco and pan masala.
- The Health Security National Security Cess Bill, 2025 will replace the compensation cess on pan masala.
- Current GST on tobacco and pan masala is 28%.
- The compensation cess was extended until March 31, 2026.
- Other significant bills will also be introduced in Parliament during the session.
New Delhi, Nov 30 (NationPress) The Government has announced the introduction of The Central Excise Amendment Bill, 2025 and The Health Security National Security Cess Bill, 2025 among a total of 13 bills during the Winter Session of Parliament starting Monday.
Finance Minister Nirmala Sitharaman is set to present these two bills in the Lok Sabha. Their objective is to substitute the existing GST compensation cess with an excise levy, ensuring that the elevated taxes on sin goods such as tobacco and pan masala remain at their present levels, as confirmed by sources.
The Health Security National Security Cess Bill, 2025 aims to take over the compensation cess on pan masala. This bill is designed to "enhance resources for national security expenditures and public health" by imposing a cess on the machinery or processes involved in the production of specified goods.
At present, a Goods and Services Tax (GST) of 28 percent is applied to both tobacco and pan masala, in addition to a compensation cess at varying rates.
The compensation cess was extended for an additional four years until March 31, 2026, with the funds being utilized to repay loans taken by the center to compensate states for GST revenue losses during the Covid crisis.
On September 3, 2025, the GST Council determined to maintain the compensation cess on tobacco and pan masala until the loans are fully repaid. Since the loan repayment is set to conclude in December, this cess will need to be phased out.
Additionally, the compensation cess on other luxury items ended on September 22 when GST rates were rationalized to just two slabs of 5 and 18 percent. A fixed rate of 40 percent was designated for luxury goods and sugary beverages like Pepsi and Coke.
Other bills slated for introduction in this parliamentary session include the National Highways (Amendment) Bill, the Atomic Energy Bill, the Corporate Laws (Amendment) Bill, the Insurance Laws (Amendment) Bill, and the Higher Education Commission of India Bill - 2025.
Point of View
It is crucial to recognize the implications of the proposed legislation. While the intention to secure funding for public health and national security is commendable, the reliance on taxing sin goods raises ethical questions. The balance between revenue generation and public health is delicate, and careful consideration is needed to ensure the well-being of citizens.
NationPress
01/12/2025
Frequently Asked Questions
What is the purpose of the Central Excise Amendment Bill, 2025?
The bill aims to replace the GST compensation cess with an excise levy on sin goods to maintain high tax levels.
How will the Health Security National Security Cess Bill, 2025 affect pan masala?
It will replace the existing compensation cess on pan masala and generate funds for national security and public health.
What is the current GST rate on tobacco and pan masala?
A GST of 28 percent is currently levied on both tobacco and pan masala.
When is the compensation cess set to be phased out?
The compensation cess will be phased out after the loan repayment, expected to conclude in December.
What other bills will be introduced in the Winter Session?
Other bills include the National Highways (Amendment) Bill, Atomic Energy Bill, and several others.
