New Delhi: Finance Minister Nirmala Sitharaman on Thursday sought to allay public concerns by making it clear that the newly proposed Health and National Security Cess will be imposed only on demerit goods such as pan masala, and not on essential commodities. Addressing the Lok Sabha, the minister said the cess is designed to create a stable and dedicated revenue stream for two priority sectors—healthcare and national security.
Sitharaman emphasised that the measure is meant to curb consumption of products that pose serious health hazards. “This cess is purely deterrent in nature. It in no way impacts essential items consumed by ordinary citizens,” she told the House.
The minister explained that the funds collected through the cess will be shared with the states and will be specifically reserved for health programmes, awareness campaigns, and security-related needs. She added that the levy would not interfere with GST revenues, as it operates outside the GST framework.
How the Cess Will Work
Sitharaman clarified that the cess will be charged over and above GST, based on the production capacity of machines used in the manufacturing of pan masala.
“Every factory will face a different liability depending on how much they can produce,” she said, noting that this system has been proposed because excise duty cannot be reintroduced and GST does not sufficiently cover manufacturing aspects of pan masala production.
At present, products like pan masala and tobacco attract 28% GST plus compensation cess. With the compensation cess being phased out, the GST rate on these goods will be pushed to the maximum slab of 40%, she confirmed.
“This transition ensures that harmful products continue to remain highly taxed, protecting public health while ensuring steady revenue,” Sitharaman noted.
