LS clears Bill to levy security, health cess on pan masala

The Health Security and National Security Cess Bill, 2025, was passed by the Lok Sabha on Friday despite objections by several opposition members, who wanted it referred to the select committee of Parliament, citing it aimed to raise funds through cess on demerit or sin goods such as pan masala.

Responding to the discussion on the Bill, which had begun on Thursday, Finance Minister Nirmala Sitharaman said the government wanted to ensure that goods in the demerit category were not cheap.

She said as the Finance Minister, it was also her responsibility to generate revenue. The reply was in response to questions by members on why pan masala should be taxed for the defence budget.

"No member would want a lower tax on pan masala. Money can be used for anything, but collecting revenue is justified. Public health is a state domain while national defence comes under the Centre’s purview. Today when credible defence capabilities are absolutely critical, we need to raise resources. Precision weapons, space assets, cyber operations, etc, dominate modern conflicts. They are becoming capital-intensive," she said.

Taunting the Opposition, she referred to a statement by a former Defence Minister, who had apparently cited inability to procure ammunition owing to lack of funds.

"The gap with which the defence sector suffered, it took a long time to restore that kind of preparedness of our armed forces," the Finance Minister said, underlining the need for such a cess. She pointed out that the government had given an exemption on personal income tax in the Budget.

"Within a year, we gave a huge reduction in income tax. The Kargil conflict suffered because of lack of preparedness. Army Generals have said that because of budgetary constraints from the early 1990s, the Army was holding only around 80 per cent of authorised weapons.... We don't want that stage ever in India again," she said.

In response to questions about the lack of clarity regarding distribution of the cess, she said Section 7 clearly explained the framework.