The Lok Sabha passed the Central Excise (Amendment) Bill, 2025 and Health and National Security Cess Bill, 2025, replacing the GST compensation cess on tobacco, cigarettes, and pan masala.
The new regime maintains high excise duties (₹5,000–₹11,000 per 1,000 cigarettes, 60–70% on unmanufactured tobacco, 100% on nicotine products) and a dedicated cess for health and national security, ensuring revenue continuity, fiscal discipline, and targeted social spending after the cess phaseout in March 2026.
Objective of the Amendment
The reform aims to,
- Ensure revenue continuity after the phaseout of GST compensation cess.
- Maintain high taxation on demerit goods like tobacco and pan masala.
- Shift tax proceeds from general use to targeted public health and national security spending.
- Support the loan repayment taken by the Centre to compensate states during the COVID-19 fiscal crunch.
