Lok Sabha Passes the Health Security and National Security Cess Bill, 2025

The Lok Sabha has passed the Health Security and National Security Cess Bill, 2025, introducing a new cess on pan masala manufacturing units. The measure is intended to generate dedicated revenue for national security and public health—two areas identified as critical priorities.

Objective of the New Cess

The bill seeks to create a predictable resource stream by levying a cess on machines and processes used in the production of pan masala and related goods. The government argues that these funds will strengthen both national security capabilities and public health systems, particularly in areas affected by high consumption of such products.

Revenue Sharing With States

Finance Minister Nirmala Sitharaman clarified that the cess proceeds will be shared with states, noting that public health falls under state jurisdiction. She emphasised that the move will not impact Goods and Services Tax revenues, as GST on pan masala remains capped at 40 per cent.

Mechanism and Fiscal Impact

The cess will be levied on the production capacity of machines rather than on retail sales. This method aims to curb revenue leakage and ensure predictable collections. Sitharaman noted that cess as a share of gross total revenue stands at 6.1 per cent in the current fiscal, somewhat lower than levels recorded between 2010 and 2014.

Exam Oriented Facts

• The Lok Sabha has passed the Health Security and National Security Cess Bill, 2025.
• The cess will be levied on machines used in pan masala manufacturing.
• Funds from the cess will support national security and public health initiatives.
• The GST rate on pan masala remains at a maximum of 40 per cent.

Policy Significance and Broader Context

The bill is positioned as part of a wider effort to improve health outcomes and bolster security preparedness through targeted fiscal tools. By tapping into a sector with significant social and health implications, the government aims to reinforce long-term sustainability in two key public domains.