The Central Excise (Amendment) Bill, 2025, seeks to replace the GST Compensation cess, which is levied on all tobacco products currently
In a major development, Finance Minister Nirmala Sitharaman has introduced two bills in the Lok Sabha on Monday to levy excise duty on tobacco and tobacco products and a new cess on the manufacturing of pan masala, which is aimed at replacing the goods and services tax (GST) compensation cess on such goods.
The Central Excise (Amendment) Bill, 2025, seeks to replace the GST Compensation cess. This is levied on all tobacco products currently. This includes cigarettes, chewing tobacco, cigars, hookahs, zarda and scented tobacco. The objective is to provide the fiscal space to the government to raise the rate of central excise duty on such products so as to protect tax incidence, once the GST compensation ends, as per the reports.
On the other hand, the Health Security se National Security Cess Bill 2025 is aimed at levying cess on the production of specified goods like pan masala. The Central Excise Amendment Bill is aimed at levying excise duty on cigars/cheroots/cigarettes in the range of Rs 5,000 to Rs 11,000 per 1,000 sticks. The reports added that it also proposes the levy of 60 to 70 per cent on unmanufactured tobacco and 100 per cent on nicotine and inhalation products.
The reports added that cigarettes attract a compensation cess of 5 per cent ad-valorem plus a Rs 2,076 to Rs 3,668 per 1,000 sticks cess, which is dependent on the length. Once the compensation cess comes to an end, the reports highlighted that the sale of tobacco and such products will see a 40 per cent GST plus excise duty. On the other hand, pan masala will attract 40 per cent GST and the Health Security se National Security Cess.
