Sitharaman to Introduce Bill in Lok Sabha Imposing Pan Masala Cess for Health and Security Funding

New Delhi, Dec 04 : Finance Minister Nirmala Sitharaman is set to move the Health and National Security Cess Bill, 2025, in the Lok Sabha on Thursday. The legislation proposes a cess on the production of select goods, including pan masala, with the objective of generating dedicated revenue for public health programs and national security initiatives.

Originally introduced in the Lok Sabha on December 1, the Bill applies to both machine-based and manual production of notified goods. “It is proposed to levy a ‘Health and National Security Cess’ to ensure targeted utilisation for public health and national security,” the Finance Minister stated in the Bill’s Statement of Objects and Reasons.

Under the Bill, the cess will be calculated based on the production capacity of machines or manual units. Machine-based production will attract rates ranging from Rs 1.01 crore per month for smaller machines to Rs 25.47 crore for high-capacity machines, while wholly manual units will be liable for a fixed Rs 11 lakh per month. The government reserves the right to double these rates in the public interest.

To ensure compliance, officers of commissioner rank or above will conduct audits and initiate recovery actions for unpaid cess, including interest and penalties. The Bill prescribes penalties for offences such as failure to declare production machines, non-payment of cess, or tampering with seized goods, ranging from Rs 10,000 to Rs one lakh. In cases of evasion exceeding Rs one crore, criminal prosecution with imprisonment of one to five years, fines, or both is applicable.

The legislation also introduces a three-tier appeal mechanism, allowing taxpayers to challenge orders before an appellate authority, the Customs, Excise, and Services Tax Appellate Tribunal, and ultimately the High Court on substantial legal questions. Officers of the rank of Joint Commissioner or higher will have powers to inspect production and storage facilities and seize goods, machines, or documents when evasion is suspected.

“The cess is linked to production capacity rather than actual output. Taxable persons will self-declare machines or processes at each factory, and proper officers may verify and recalibrate these declarations,” Sitharaman said, underlining the Bill’s emphasis on transparency and monitoring.

The Health and National Security Cess aims to create a stable revenue stream to support key public health and national security objectives, reflecting the government’s commitment to strengthening the nation’s well-being.