NEW DELHI: With the beginning of the Winter Session of Parliament on Monday, the government is set to table two key bills in the Lok Sabha proposing an excise duty on tobacco and tobacco products, and another introducing a new cess on the manufacturing of pan masala.

What is Central Excise (Amendment) Bill, 2025?

Finance minister Nirmala Sitharaman is expected to introduce the Central Excise (Amendment) Bill, 2025, which proposes changes to the Central Excise Act, 1944. The Central Excise Amendment Bill will replace the current GST compensation cess on cigarettes, chewing tobacco, cigars, hookahs, zarda and scented tobacco. Once the cess ends, tobacco products will attract GST plus excise duty. While, Pan masalas will shift to a combination of GST and the new Health Security–National Security Cess.The bill aims “to give the government the fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence” after the GST compensation cess ends.Sin goods or demerit goods including tobacco and pan masala, presently attract 28% GST plus compensation cess, but after the transition, they will fall under the highest GST slab of 40%, aligned with the GST Council’s September rate restructuring.Alongside this, the FM is also likely to introduce the Health Security se National Security Cess Bill, 2025, which seeks to levy a new cess on machines or processes used in the manufacture of pan masala and other notified goods.The bill states that the cess is meant, “to levy the Health Security se National Security Cess to contribute towards the twin purposes of enabling targeted utilisation for public health, as well as national security.”The proposed health–security cess will apply in addition to all other taxes. Manufacturers will be required to file a self-declaration of all machines or processes at each facility, with the cess calculated for each location.

Why the changes now

The GST compensation cess, introduced in 2017 for five years to offset states’ revenue loss, was extended till March 31, 2026, to repay the Centre’s Covid-era borrowing. With loan repayment expected to be completed in December, the cess is set to cease, PTI reported.In September, the GST Council decided to continue the cess only on tobacco and pan masala until repayment was complete, while ending it on luxury items on September 22. Those goods now fall under a simplified two-rate GST structure of 5% and 18%, with a special 40% slab for ultra-luxury and demerit goods.The two new bills will ensure that the tax burden on tobacco and pan masala remains unchanged once the compensation cess is discontinued.

Thirteen other bills listed for consideration include:

The Central Excise Amendment Bill has been allotted six hours of discussion in the Lok Sabha, while the Manipur GST (Second Amendment) Bill, 2025, has been given three hours.