Lok Sabha passes Health Security and National Security Cess Bill, clears cess on pan masala manufacturing units

The Lok Sabha on Friday cleared the Health Security and National Security Cess Bill, opening the door for the Centre to levy a special cess on pan masala manufacturing units. The revenue raised from this levy will be channelled into bolstering national security initiatives and improving public health systems.

During the Parliament Winter Session's debate, Finance Minister Nirmala Sitharaman said that the cess will be shared with the states, noting that public health falls within the state government’s domain.

The bill, first introduced on December 1, 2025, allows the Centre to levy a cess not only on pan masala but also on any additional products that may be notified later.


Under the proposed framework, the cess will be charged to anyone who owns or controls machines, or undertakes manual processes, to produce the specified goods. The amount payable will depend on the type of production: machine-based or manual. Manufacturers will have to calculate the cess themselves, file monthly returns, and pay interest on any delayed payments.

For machine-operated units, the cess will rise according to the machine’s capacity — measured by the maximum number of pouches it can pack per minute — and the weight of each pouch.

For example, a machine producing up to 500 pouches a minute, each weighing up to 2.5 grams, will attract a monthly cess of ₹1.01 crore. At the higher end, machines packing between 1,001 and 1,500 pouches a minute, with each pouch weighing more than 10 grams, will face a cess of ₹25.47 crore per month.

However, factories operating entirely through manual production will be required to pay a fixed cess of Rs 11 lakh per month.

The bill also dictates that the government will also have the power to increase cess rates by up to twice the prescribed amount if it believes doing so is necessary in the public interest. Any higher rate notified will apply only for a specified period.