The Lok Sabha on Friday passed the Health and National Security Cess Bill, 2025, which introduces a cess on the production of specific goods, including pan masala, to generate dedicated funds for bolstering public health programs and national security efforts.
Originally introduced in the Lok Sabha on December 1, the Bill targets machinery and manual processes involved in manufacturing pan masala and other goods as notified by the central government.
Finance Minister Nirmala Sitharaman, in her Statement of Object and Reasons, explained, “It is proposed to levy the Health and National Security Cess to contribute towards twin purposes of enabling targeted utilisation for public health, as well as national security.”
The cess will be levied monthly on persons owning or controlling machines or manual processes used in the production of the specified goods. Taxpayers are required to self-assess the cess based on the production capacity of their machinery or manual units and file monthly returns. Interest will be charged on delayed payments to ensure timely compliance.
The cess rates differ according to production capacity. For example, a machine operating up to 500 pouches per minute, each weighing up to 2.5 grams, will attract a cess of Rs 1.01 crore per month. This rate escalates to Rs 25.47 crore monthly for machines operating at speeds between 1,001 and 1,500 pouches per minute with pouch weights exceeding 10 grams. For factories relying entirely on manual production, a fixed cess of Rs 11 lakh per month will apply. The government reserves the right to increase these rates up to twice the specified amount if deemed necessary in the public interest.
To enforce compliance, officers at the rank of Commissioner or above will conduct audits and initiate recovery actions for unpaid or underpaid cess amounts, including applicable interest and penalties. The Bill stipulates penalties ranging from Rs 10,000 or the evaded cess amount (whichever is higher) up to Rs one lakh for aiding violations. In cases of significant fraud or evasion exceeding Rs one crore, criminal prosecution with imprisonment ranging from one to five years and fines may be imposed.
The legislation establishes a three-tier appeal process for aggrieved parties, allowing appeals to an appellate authority, followed by the Customs, Excise, and Services Tax Appellate Tribunal, and ultimately the High Court on substantial legal questions.
Additionally, officers ranked Joint Commissioner or higher will have the authority to inspect manufacturing and storage premises, and to search and seize goods, machinery, documents, or records if evasion is suspected.
Finance Minister Sitharaman emphasised the Bill’s focus on transparency and monitoring: “The cess is linked to the production capacity of machines or other processes rather than the quantity actually produced. Taxpayers must self-declare all machines or processes at each factory or premises, and the cess will be calculated in aggregate for each location. Proper officers may verify and recalibrate these declarations through prescribed mechanisms. Compliance will be ensured through technological and inspection-based monitoring.”
This new cess aims to create a stable and dedicated revenue stream to support critical public health and national security objectives, reflecting the government’s commitment to safeguarding the nation’s well-being on multiple fronts.