Winter Session: Centre plans to introduce new Cess on tobacco products

The Winter Session of Parliament has begun from Monday with a packed legislative agenda, including major proposals related to taxation on tobacco products. Finance Minister Nirmala Sitharaman is set to introduce two key bills aimed at restructuring the cess regime on items such as cigarettes, pan masala, and gutkha.

According to official sources, the government will bring the Health Security–cum–National Security Cess Bill, 2025, which will apply specifically to pan masala and gutkha. This move is being seen as part of a broader strategy to curb the consumption of harmful tobacco products while also generating additional revenue for health and national security-related expenditures.

In addition, the Finance Minister will table the Central Excise Act Amendment Bill for cigarettes. Once passed, this legislation will replace the existing GST Compensation Cess that is currently levied on tobacco products.

At present, the GST Compensation Cess applies to a wide range of tobacco items, including cigarettes, chewing tobacco, cigars, zarda, hookah, and scented tobacco. The proposed changes signal a significant shift in how these products will be taxed in the future.

A notable feature of the new framework is the introduction of a Health/National Security Cess on the machines and production processes used in the manufacture of cigarettes, gutkha, and pan masala. This marks a move away from taxing only the finished product to also taxing the means of production.