Winter Session: Lok Sabha passes Bill to levy cess on pan masala units

New Delhi: Finance minister Nirmala Sitharaman on Friday said the proposed Health and National Security Cess will be levied on pan masala manufacturing units, assuring states that the revenue earned would be shared with them for expenditure on health schemes.

Replying to the debate on the Health Security se National Security Cess Bill, 2025, Finance Minister Nirmala Sitharaman said the constitutional power of levying a cess rests in Article 270, which authorises Parliament to levy a cess for a specific purpose.

The Bill was later passed by voice vote in the Lok Sabha.

It seeks to augment the resources for meeting expenditure on national security and public health by levying a cess on the machines installed or other processes undertaken to manufacture pan masala and similar products.

The Finance Minister further said the Centre has provided more than what it collected from the cess in the period from 2014-15 to 2025-26.

Reeling out data transfer of funds to states, she said, Rs 6,49,459 crore in cess was transferred, while the government collected Rs 6,07,573 crore from health and education from 2014–15 to 2025–26.

The Agriculture Infrastructure and Development Cess was introduced in 2021–22, she said, adding that the government has so far transferred Rs 3,77,214 crore compared to a collection of Rs 3,87,226 crore.

Cesses as a percentage of Gross Tax Revenue (GTR), excluding the Compensation Cess, were 6.1 per cent as stated in BE 2025–26, which is lower than 7 per cent during 2010–14.

Dismissing criticism for levying one more cess, the Finance Minister said, “It is not as though in 2014 the government decided that we would levy cesses and not give funds to the states. Before 2014, four types of cesses were already being collected”.

In 1974, a cess was imposed on crude oil for the creation of the Crude Oil Industry Development Fund, she said, adding that this fund was established in 2023–24.

An amount of Rs 17,730 crore and Rs 19,376 crore were provided for transfer to the Oil Industry Development Fund in RE 2024–25 and BE 2025–26, respectively, she said.

The National Calamity Contingent Duty has been collected since 2001, and the Road and Infrastructure Cess has been collected since 2000.

An amount of Rs 11.34 lakh crore was transferred during 2014–15 to 2025–26 under this cess, while the collection was Rs 11.11 lakh crore during the same period, she added.