New Delhi: The Lok Sabha on Friday passed the Health Security se National Security Cess Bill, 2025, a legislation designed to generate additional revenue from demerit goods such as pan masala to support India’s public health needs and strengthen national defence. Finance Minister Nirmala Sitharaman, replying to a detailed debate in the House, said the measure is essential to meet modern defence requirements while also discouraging harmful consumption patterns.
She said public health falls under the State List, whereas defence is a central responsibility, and both sectors now require assured funding. She noted that goods like pan masala should not remain inexpensive when they carry clear health risks. Responding to objections regarding linking sin goods with defence spending, she argued that raising revenue from such items is justified and widely accepted. She also said no member would want lower taxes on products such as pan masala.
The Finance Minister emphasised that today’s defence capabilities depend heavily on precision weapons, cyber operations, space assets and other capital-intensive technologies. She referred to past shortages in defence preparedness and reminded the House of a previous Defence Minister openly admitting a lack of funds for essential ammunition. She said it took years to restore the armed forces to the required level of readiness, and the country must never return to that situation. She also highlighted that her government provided major relief in personal income tax within a year of coming to power and underlined that the Kargil conflict had exposed the consequences of prolonged budget constraints, with the Army functioning at only 70–80 per cent of authorised equipment levels in the early 1990s.
Addressing concerns about how the new cess will be distributed, she clarified that Section 7 of the Bill lays out the framework and that the allocation mechanism will be defined in the rules. She stressed that cess falls fully within Parliament’s domain, and the rate will be fixed only after discussions with members. She said the constitutional authority for imposing a cess comes from Article 270, allowing Parliament to introduce a cess for a specific purpose.
She also presented a detailed account of earlier cesses to respond to suggestions that the Centre withholds funds from states. She said multiple cesses existed long before 2014, including the crude oil cess introduced in 1974, the National Calamity Contingent Duty initiated in 2001 and the Road and Infrastructure cess levied since 2000. She added that between 2014–15 and 2025–26, the Health and Education cess collected Rs 6,49,459 crore, while the Centre transferred Rs 6,07,573 crore, indicating that distribution to states has been substantial. She maintained that the government has not deviated from established norms.
The discussion also touched on a related bill passed earlier, in which excise duty on tobacco products and manufacturing was increased. The Finance Minister clarified again that the measure involved excise duty and not a cess, assuring members that the revenue would go into the divisible pool and be shared with states as per the 41 per cent formula. She said the government is reintroducing the excise duty structure that existed before the GST regime.
Sitharaman introduced both the Central Excise (Amendment) Bill, 2025, and the Health Security se National Security Cess Bill, 2025, earlier this week at the start of the Winter Session. With the Lok Sabha clearing the new cess, the government has taken another step toward bolstering India’s defence readiness while strengthening the framework that supports public health financing.
