Sitharaman Introduces Health Security Bill, Says New Cess Will Fund Public Health and National Defence – Obnews

Union Finance Minister Nirmala Sitharaman on Thursday introduced the Health Security se National Security Cess Bill, 2025 in the Lok Sabha, presenting it as a key measure to secure predictable, long-term funding for India’s public health system and national defence priorities. The proposed legislation would impose a production-based cess on items such as pan masala and other notified demerit goods linked to significant public health risks.

Explaining the rationale behind the bill, Sitharaman said the new cess is necessary because the current GST structure taxes consumption rather than production, leaving certain harmful products outside the reach of excise-based taxation. While cigarettes are subject to both GST and excise duty, pan masala cannot be brought under excise law because it is not classified as an excisable product. The new cess seeks to close that gap by creating a mechanism that taxes such products based on production capacity rather than sales volume.

Sitharaman stressed that the cess would not be imposed on essential commodities and is meant to function as a deterrent against the consumption of goods that impose heavy health costs on both central and state governments. She said the bill aims to provide a stable revenue stream for public health systems, while also supporting India’s growing national security requirements in an era of evolving threats.

The bill proposes cess rates ranging from ₹1.01 crore to ₹25.47 crore per machine per month, with the central government retaining the authority to double these amounts if needed. It also includes stringent compliance measures such as audits, recovery mechanisms with penalties and interest, and strict punishments for offences including undeclared production, tax evasion, non-registration and tampering with seized goods. Fraud involving more than ₹1 crore may carry imprisonment of up to five years.

Congress MP Varun Chaudhury raised concerns that the legislation does not explicitly clarify whether the cess revenue will be shared with states and suggested referring the bill to a Select Committee. He also pointed out that the title of the bill appears bilingual, which, he argued, is unnecessary.

The Health Security bill follows the Lok Sabha’s recent passage of the Central Excise (Amendment) Bill, 2025, which revises excise duties on tobacco products after the end of the GST compensation cess period. Sitharaman clarified that excise duty — not a cess — will apply to tobacco, and that the revenue collected through excise will go into the divisible pool and be redistributed to states based on existing formulas.

Together, the two bills reflect the government’s effort to reinforce public health financing and ensure that products associated with high health and societal costs are taxed appropriately, both at the production and consumption levels.