Centre to bring new levies on tobacco, pan masala as GST cess set to lapse, Pg19

Key Highlights:

• The central government will introduce two bills in Parliament on Monday, December 1, 2025, to increase levies on tobacco and pan masala.
• The Central Excise (Amendment) Bill, 2025 will hike excise duty on tobacco products.
• A new 'Health Security se National Security Cess Bill, 2025' will be levied on pan masala.
• The GST compensation cess is set to lapse after March 2026, prompting these changes.
• Excise duty of 60-70% is proposed on unmanufactured tobacco, while cigars will face 25% or Rs 5,000 per thousand.
• A cess of Rs 1.01 crore will be levied on pan masala production of up to 500 pouches per minute.

Detailed Insights:

• The excise duty hike on tobacco aims to maintain tax revenue after the GST compensation cess ends.
• The 'Health Security se National Security Cess' will fund national security and public health expenditures.
• The cess on pan masala will be linked to the production capacity of manufacturing units.
• The GST compensation cess, introduced in 2017, guaranteed states compensation for revenue losses at a compounded rate of 14% from the base year 2015-16.
• The extension of the compensation cess until March 2026 is to repay loans taken to compensate states for revenue shortfalls.
• The GST Council has previously discussed measures to prevent tax evasion in the pan masala and gutkha industries.
• Current GST rates include a 28% GST along with an additional cess on tobacco and pan masala.

Key Concepts Involved:

• Excise Duty: A tax levied on the production or sale of specific goods within a country.
• GST Compensation Cess: A levy to compensate states for revenue losses due to the implementation of GST.
• Ad Valorem Tax: A tax based on the assessed value of an item.