Govt to Introduce Sin Goods Cess Bill, Replacing GST Levy in Winter Session

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The Union government is set to introduce a bill in the Lok Sabha on Monday to levy a 'Health Security se National Security Cess' on pan masala and other items notified by the central government. The proposed cess aims to meet expenditure on national security and public health. According to sources, the bill may immediately impose a cess on pan masala and could later extend it to other sin goods like cigarettes and tobacco products, excluding bidis. The government will have the power to add any item to the list in the future, citing public welfare. The proposed cess will be levied on the production capacity of specified items, with individual producers or firms required to self-declare location-wise production capacity of their units. The cess rates may vary based on production speed and the weight of specified goods. For example, a machine with a capacity to produce 500 units of 2.5gm pouches per minute per machine may be levied a cess of around ₹100 per month. However, if the machine produces more than 1,000 to 1,500 units, the cess amount would be ₹30.3 lakh per month. The introduction of the cess bill is expected to replace the Goods and Services Tax (GST) compensation cess on tobacco products, which will cease to exist after the government services the remaining principal and interests of back-to-back loans taken during the Covid period. The 56th GST Council in September 2025 decided to remove compensation cess in a phased manner until the remaining liability of the back-to-back loans taken to fund state revenue losses during the pandemic period is discharged. This was expected by December this year. The GST Council had empowered the Union finance minister to decide the actual date on this matter. The government intends to introduce The Insurance Laws (Amendment) Bill, 2025 to raise the foreign direct investment (FDI) limit in the insurance sector to 100% from 74%. The Health Security se National Security Cess Bill, 2025 is scheduled to be introduced in the Lok Sabha along with The Central Excise (Amendment) Bill, 2025. The government has distributed the bill among MPs, and it is expected to be a priority in both the Lok Sabha and the Rajya Sabha Business Advisory Committee meetings.