Introduction of New Bills in Parliament

On December 1, 2025, Finance Minister introduced two significant Bills in the Lok Sabha: The Health Security se National Security Cess Bill, 2025 and The Central Excise (Amendment) Bill, 2025.

Objectives of the Bills

• Compensate for GST Cess Loss: The Bills aim to replace revenue from the Goods and Services Tax (GST) compensation cess on tobacco products, which is soon to be discontinued.
• Augment Funding:
  1. The Health Security se National Security Cess Bill is designed to increase funding for health and national security by imposing a cess on machines or processes in the manufacture of pan masala.

Background on GST Compensation Cess

• Introduction: The GST compensation cess was introduced in 2017 to compensate States for revenue losses due to GST implementation.
• Shortfalls: During the COVID-19 pandemic (2020-21 and 2021-22), the cess revenue fell short, necessitating Central government borrowing to meet state compensation.
• Discontinuation: The cessation of this cess will occur once the government repays the loans, expected in the coming months.

Central Excise (Amendment) Bill, 2025

• Objective: To provide fiscal space for increasing Central excise duty on tobacco products, thus protecting tax revenue.
• Impact of GST: The introduction of GST and compensation cess reduced central excise duties on tobacco, maintaining tax incidence levels.

Health Security se National Security Cess Bill, 2025

• Purpose: To boost resources for national security and public health through a cess on machinery and processes in pan masala production.
• Cess Mechanism:
  1. Linked to production capacity of machinery or processes, not actual production quantity.
  2. Requires self-declaration of machines or processes by taxable persons for aggregate cess calculation.