News Desk – Finance Minister Nirmala Sitharaman on Monday introduced two important bills in the Lok Sabha to continue taxing tobacco and pan masala even after the current GST compensation cess ends.
What Are the Two New Bills?
Central Excise (Amendment) Bill, 2025
This bill will allow the government to levy excise duty on tobacco products such as:
Cigarettes
Cigars
Chewing tobacco
Hookah tobacco
Zarda and scented tobacco
It will replace the existing GST compensation cess on these items.
Health Security se National Security Cess Bill, 2025
This bill introduces a new cess on the manufacturing of pan masala. The government can also add more products to this list in the future.
Why These Bills?
The GST compensation cess on tobacco and pan masala will end soon because the Centre has almost finished repaying the COVID-era loans taken to compensate states.
To avoid loss of revenue from these “sin goods,” the government wants to bring a new tax structure.
How Much Tax Will Now Apply?
Under the new plan:
Tobacco Products
40% GST
Plus new excise duty
Cigarettes/cigars: ₹5,000–₹11,000 per 1,000 sticks
Unmanufactured tobacco: 60–70% duty
Nicotine/inhalation products: 100% duty
Currently, cigarettes attract 28% GST + 5% cess + ₹2,076–₹3,668 per 1,000 sticks (depending on length).
Pan Masala
40% GST
Plus Health Security se National Security Cess
Why This Cess?
The bill says the money collected will go toward:
Public health programmes
National security efforts
Opposition’s Objection
TMC MP Saugata Ray opposed the bills, saying:
The excise bill doesn’t mention that tobacco is harmful.
Cess money does not go to states, so the new cess will reduce states’ revenue share.
Background
GST compensation cess began in 2017 for 5 years to help states manage revenue loss after GST rollout.
It was extended to 2026 to repay COVID loans.
Most luxury items were removed from the cess list in September 2025, but tobacco and pan masala were kept until the new tax structure was ready.
What These Bills Ensure
The two new bills will keep the overall tax burden the same on tobacco and pan masala even after the GST compensation cess is removed.
