'Health, National Security Cess not on essential commodities, revenues to be shared with states': FM Nirmala Sitharaman

New Delhi: Finance Minister Nirmala Sitharaman on Thursday said the proposed Health and National Security Cess will not be levied on essential commodities, and the proceeds will be shared with states under specific health schemes.

Moving the Health Security se National Security Cess Bill, 2025, for discussion in the Lok Sabha, Sitharaman said the levy would be imposed on the production capacity of pan masala units, which is a demerit good.

"By levying the cess, we expect that it would act as a deterrent for pan masala consumption. Part of the revenue from this cess will be shared with states through health awareness or other health-related schemes/activities," Sitharaman said.

The minister said pan masala will continue to attract the maximum 40 per cent Goods and Services Tax (GST). On top of that, this Health and National Security Cess will be levied on the production capacity of pan masala manufacturers.

This cess will ensure a "dedicated and predictable resource stream" for two domains of national importance -- health and national security.

Sitharaman said that since excise duty cannot be levied on pan masala, the government is bringing in a separate cess bill to ensure that production of pan masala is taxed, along with GST, which is levied on consumption.