The government will place two new bills before the Lok Sabha on Monday (December 1, 2025). One bill aims to bring back excise duty on tobacco and tobacco products, and the other introduces a new cess on the making of pan masala. The Central Excise Amendment Bill, 2025 will replace the current GST Compensation Cess that is charged on items like cigarettes, chewing tobacco, cigars, hookahs, zarda and scented tobacco. The bill says the government needs this change so it can increase excise duty on tobacco products in the future and make sure the tax amount does not fall once the GST Compensation Cess ends.
The second proposal, the Health Security se National Security Cess Bill, 2025, will place a special cess on the production of certain goods, starting with pan masala. The government can later add more products to this list if needed.
At present, sin goods like tobacco and pan masala carry a GST of 28% along with a separate compensation cess that varies from product to product.
After the compensation cess is removed, tobacco items will be taxed with GST plus excise duty. Pan masala will be taxed with GST plus the new Health Security se National Security Cess.
Since the 28% GST slab has been removed, these sin goods will now fall under the highest GST rate of 40%.
