Govt to bring in 2 Bills in Lok Sabha Mon to retire GST cess on tobacco items
This story was originally published at 20:04 IST on 30 November 2025
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NEW DELHI – The government is slated to impose an additional levy on tobacco products including cigarettes, pan masala and gutkha by amending the Central Excise Act and introducing The Health Security Se National Security Cess Bill, 2025 in the Parliament on Monday. The new levy on these products will replace the compensation cess under the Goods and Services Tax regime.
According to a finance ministry official, The Health Security Se National Security Cess Bill seeks to introduce a new cess on pan masala, and the amendment to the Central Excise Act is likely to allow increasing duty on tobacco products like cigarettes.
The GST compensation cess was introduced to bring states on board to adopt the GST regime in 2017. The Centre had promised to protect 14% revenue growth for states for the first five years by levying a compensation cess on certain luxury goods, including motor vehicles, expensive motorcycles, caffeinated beverages, and sin goods such as tobacco items and pan masala. Initially set to expire in June 2022, the cess was extended until March 2026 to repay INR 2.69 trillion in loans taken by the Centre to partly bridge the revenue shortfall of states during the COVID-19 pandemic.
On Sept. 3, the GST Council overhauled the indirect tax structure by slashing rates on a host of common and daily-use items. The council also introduced a new GST rate of 40% on luxury goods to subsume the GST compensation cess that some of the items in the 28% GST bracket attracted. However, the council decided to continue with the compensation cess on tobacco-related products till the GST-related loans were repaid. The government had said that the overall tax incidence on such sin items would not be allowed to come down in post- compensation cess era. End
Reported by Sagar Sen
Edited by Avishek Dutta
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