Crackdown On Pan Masala, Gutka: FM introduces 2 bills in LS

New Delhi: Union Finance Minister Nirmala Sitharaman on Monday moved two new Bills in the Lok Sabha that look to repurpose levies on 'sin goods' such as tobacco, pan masala and related products ahead of the scheduled phaseout of the GST compensation cess levied on them.

The Central Excise (Amendment) Bill seeks to levy excise duty on tobacco and related products, while 'The Health Security se National Security Cess Bill, 2025' would be applicable on manufacturing of pan masala and other goods that the government may notify.

The Bills, introduced amid din in the Lok Sabha as Opposition members protested demanding a discussion on the Special Intensive Revision (SIR) of electoral rolls, may be taken up for discussion in the House on Tuesday.

TMC member Saugata Ray opposed introduction of the two Bills saying that tobacco is harmful but the Central Excise (Amendment) Bill does not mention that. With regard to the Health Security se National Security Cess Bill, 2025, Ray said that since cess proceeds are not shared with states he opposes the bill. While the revenues from levy of excise on tobacco would be part of the divisible pool of tax revenues, the collection from the health and national security cess would go towards funding public health initiatives and national security while maintaining high taxation on 'sin goods'. The Central Excise (Amendment) Bill provides for a new central excise duty on tobacco products like cigarette, chewing tobacco, cigars, hookahs, zarda, and scented tobacco, replacing the existing compensation cess.

The Bill seeks to levy excise duty on cigars / cheroots / cigarettes in the range of Rs 5,000-11,000 per 1,000 sticks depending on the length. Also, it proposes levy of 60-70 per cent on unmanufactured tobacco and 100 per cent on nicotine and inhalation products. This will be over and above the 40 per cent GST rate that would be applicable on sin goods. Currently, tobacco and pan masala attract 28 per cent GST, plus a compensation cess. "We are on track to complete the loan repayment and end the compensation cess within this fiscal," a government source said, without disclosing the timeline as to when the cess levy would cease to exist.

At the time of the introduction of the GST on July 1, 2017, a compensation cess mechanism was put in place for 5 years till June 30, 2022, to make up for the revenue loss suffered by states on account of GST implementation.