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Lok Sabha Approves Cess On Pan Masala To Fund Health And National Security
Lok Sabha Approves Cess On Pan Masala To Fund Health And National Security
Responding to the debate on the Bill, Finance Minister Nirmala Sitharaman thanked members for their participation and underlined the importance of strengthening both public health and defence preparedness.
New Delhi: The Lok Sabha on Friday passed the Health Security se National Security Cess Bill, 2025, aimed at mobilising additional revenue from “demerit” or “sin” goods—such as pan masala—to support India's health security and national defence requirements.
Responding to the debate on the Bill, Finance Minister Nirmala Sitharaman thanked members for their participation and underlined the importance of strengthening both public health and defence preparedness.
She noted that public health is a State subject, while national defence lies solely with the Centre. “We need to raise resources for defence to match today's needs,” she said, emphasising that modern conflicts demand precision weapons, space assets, cyber capabilities, and other capital-intensive technologies.
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‘Demerit Goods Should Not Be Cheap'
Defending the cess on items such as pan masala, the minister said the government intends to ensure that products with social and health harms are not easily affordable. Some members had questioned why funds from such a cess should be used for defence, prompting her response:
“As Finance Minister, my responsibility is to raise resources. No member would want lower taxes on paan masala. Money can be used for various purposes, but collecting revenue is justified.”
She recalled how earlier shortages in defence budgets weakened India's preparedness. Without naming the individual, she referred to a past Defence Minister who had admitted in Parliament that ammunition could not be procured due to lack of funds. “The gap with which the Defence suffered took a long time to restore,” she said.
Income Tax Relief Highlighted
Sitharaman also reiterated that the government provided a major reduction in personal income tax within the first year of its tenure, countering suggestions that taxpayers were overburdened while new levies were being introduced.
Cess Distribution and Constitutional Framework
Addressing concerns about the utilisation of the proposed cess, she said Section 7 of the Bill clearly outlines the framework. The specific allocation mechanism will be detailed in the rules.
She clarified that Parliament has full authority over cess collection under Article 270 of the Constitution, and the rate of the cess will be determined in consultation with the House.
The minister listed earlier cesses and how their revenues were used:
Crude Oil Cess → Oil Industry Development Fund
National Calamity Contingent Duty → Disaster rehabilitation
Road & Infrastructure Cess → Central Road and Infrastructure Fund
Health & Education Cess → Higher transfer to states than collected
She also stressed that multiple cesses existed well before 2014 and cited data showing significant transfers of cess proceeds to states.
Separate Bill Passed to Increase Excise Duty on Tobacco
Earlier in the week, Parliament cleared another bill to raise excise duty on tobacco products and related manufacturing activities. Sitharaman clarified that this increase is not a cess, and that the revenue will flow into the divisible pool, with 41 percent devolved to States as per existing norms.
She added that the government is restoring excise duties that were in place before the introduction of GST.
The Finance Minister had introduced both the Central Excise (Amendment) Bill, 2025 and the Health Security se National Security Cess Bill, 2025 on the first day of the Winter Session.
Source: ZeeNews
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