The government can introduce two bills in the Lok Sabha to impose a second levy in place of the GST Compensation Cess, so that it can be ensured that even after the abolition of the cess, the tax effect on tobacco, pan masala and other sin goods remains the same. Due to this, tax on these things may also increase. The Central Excise Amendment Bill 2025 and the Health Security to National Security Cess Bill 2025 are listed to be introduced by Finance Minister Nirmala Sitharaman on Monday.
PTI quoted sources as saying that the Central Excise Amendment Bill 2025 will replace the GST compensation cess on tobacco by imposing excise duty on tobacco products like cigarettes. At the same time, the Health Security to National Security Cess Bill 2025 will replace the compensation cess on pan masala. Its purpose is to raise money to meet the expenses on national security and public health and for these purposes, to impose cess on those machines or other processes by which specific goods are made or prepared.
How much is the tax charged now?
GST of 28% is applicable on tobacco and pan masala. On top of this, compensation cess is also levied at different rates. At the time of implementation of GST on July 1, 2017, a compensation cess system was implemented for 5 years till June 30, 2022 to compensate for the revenue loss suffered by the states due to the implementation of GST.
The compensation cess was later extended for 4 years till March 31, 2026, and this collection is being used to repay the loan that the Center took to compensate for the GST losses suffered by the states during the Covid period. Since that loan repayment will be completed sometime in December, the compensation cess will end.
Cess on tobacco and pan masala
On September 3, 2025, the GST Council had decided to continue compensation cess on tobacco and pan masala until the loans taken are repaid. On other expensive items, compensation cess ended on September 22, when the GST rate was implemented with only two tax slabs of 5% and 18%. A rate of 40% was fixed for very expensive items and aerated drinks. The Central Excise Amendment Bill 2025 and the Health Security to National Security Cess Bill 2025 will ensure that the tax effect on intoxicating substances like tobacco and pan masala remains the same even after the compensation cess is abolished.
Leave a Reply