Overview On December 4, 2025 , Finance Minister Nirmala Sitharaman introduced the Health Security se National Security Cess Bill, 2025 . This Bill marks the beginning of the Centre’s reform agenda for the Winter session of Parliament. The core proposal involves levying a cess on “machines installed, or other processes undertaken in the manufacture of pan masala” to generate funds for India’s ‘health and national security’ initiatives. Legislative Status The Lok Sabha has already passed the Central Excise (Amendment) Bill, 2025 and the amended Manipur Goods and Services Tax (GST) Bill, 2025 . The Health Security se National Security Cess Bill, 2025 is currently scheduled for debate and passage. As a money Bill, it only requires passage by the Lok Sabha . The Upper House (Rajya Sabha) has 14 days to provide recommendations, which the Lok Sabha may or may not accept. Key Provisions of the Bill Cess Imposition The ‘ Health Security se National Security Cess ’ targets individuals and entities using machines for pan masala production. This includes fill and seal machines and any packing machine used to fill pan masala in pouches, tins, or other containers. Cess Calculation and Collection The cess amount is determined by: The number of pouches (tins or containers) produced per minute. The weight of pan masala packed in each pouch, tin, or container. Collection occurs at the beginning of each month, no later than the seventh. Taxpayers can self-declare the machines installed or processes undertaken in their factories. The Centre retains the power to exempt any individual or class from this cess if deemed necessary in the public interest. Cess Categories and Rates The cess is classified into four categories based on the number of pouches produced per minute: Upto 500 501-1000 1001-1500 Above 1500 Correspondingly, based on the weight of pan masala packed (ranging from 2.5 grams to above 10 grams ), the cess varies from ₹101 lakh per month per machine to approximately ₹2.5 crores . Violations are criminalized, with penalties of up to 5 years imprisonment. India’s Tobacco Use: Context According to the Global Adult Tobacco Survey (GATS-2) , nearly 42% of men and 14% of women in India use tobacco. India accounts for 70% of the world’s smokeless tobacco (SLT) users. Bidis are preferred over cigarettes, especially in rural and lower-income families. Both SLT and smoked tobacco increase the risk of cancers in the lung, head, neck, stomach, and pancreas, contributing to India's first global rank in male cancer deaths. Economic Impact Experts found that the economic cost of both SLT and smoked tobacco amounted to ₹1.77 lakh crore in 2016-17 . Despite the Centre’s ban on gutkha, the tobacco industry maintains wide accessibility through policy interference, pricing tactics, targeted marketing, and dense tobacco shop networks. Policy Recommendations and Challenges The WHO recommends taxing tobacco products at 75% of their MRP, but few have followed through. Affordability of cigarettes and bidis remains a significant challenge. Research indicates that 87% of Indian cigarette vendors sell single sticks, often near tea stalls, a practice banned in 88 countries but not in India. Issues and Concerns Raised Policy Gaps The Bill lacks provisions to allocate the collected cess to anti-tobacco campaigns or schemes. MPs have raised concerns that the increased cess will affect the incomes of tobacco farmers and laborers, particularly women in beedi rolling factories. Opposition MPs suggest the Bill aims to fill a fiscal gap due to the discontinuation of ‘compensation cess’. Effectiveness and Devolution Concerns have been raised that the Bill will not curb tobacco usage but may increase illegal smuggling. Non-BJP MPs highlighted the absence of provisions for cess devolution to States, noting the high non-expenditure of other cesses collected by the Centre. TMC MP Sougata Roy pointed out the Bill's focus on machines rather than actual production volume and criticized the criminalization of violations. Indirect Advertising Tobacco companies effectively use indirect campaigns to advertise their products. Despite bans on advertising gutkha, alcohol, and cigarettes, companies promote ‘elaichi powder’, ‘mouth fresheners’, and ‘bottled water’ under the same brand, indirectly promoting their tobacco-based products. Government Response Finance Minister Nirmala Sitharaman stated that the Bill aims to wean farmers away from tobacco, thereby reducing tobacco cultivation, production, sale, and consumption. The passage of the Central Excise (Amendment) Bill, 2025 ensures higher excise duties on tobacco due to the discontinuation of compensation cess. Ms. Sitharaman assured that 41% of the duties collected will be distributed among states, with a similar arrangement expected for the Health Security se national security cess.