Policy Shift: Parliament Extends Excise–Cess Regime on Tobacco and Pan-Masala Products

In a major fiscal and public-health policy move, Parliament on 5 December 2025 passed legislation increasing excise duties and cess on tobacco, pan-masala and related “sin goods”, as reported by Saachibaat and The Times of India. The amendments — contained in the Health and National Security Cess Bill 2025 and the Central Excise (Amendment) Bill 2025 — come ahead of the expiry of the GST Compensation Cess in March 2026, ensuring a sustainable revenue mechanism for high-risk products.

The new framework effectively replaces the outgoing GST compensation cess model with a permanent excise + cess structure, allowing the government to maintain long-term regulatory and fiscal oversight over these products. This marks an important step in aligning excise policy with the country’s wider health and development priorities.

Public Health Objective: Curtailing Harmful Consumption

Targeting Tobacco Use Through Pricing, Awareness, and Regulation

Tobacco and pan-masala consumption remain major public health challenges in India, contributing significantly to cancer, cardiovascular diseases, oral health disorders, and premature mortality. By raising excise duties, the government intends to make these products costlier, thereby reducing demand — a strategy widely endorsed by the World Health Organization (WHO).

Higher taxation on such products is expected to:

• discourage first-time users, especially youth,
• reduce habitual consumption,
• support behavioural change initiatives, and
• enhance awareness regarding health hazards.

Public health experts note that tax-based interventions are among the most effective non-pharmacological tools to control lifestyle-related diseases.

Fiscal Impact: Revenue for Health & Security

Sustainable Funding After GST Compensation Cess Ends

With the GST compensation cess nearing its end, the government faces the challenge of maintaining revenue flows tied to critical expenditure heads. The new legislation ensures a stable and predictable revenue stream, channelled specifically toward public health programmes and national security needs.

This approach supports:

• fiscal consolidation,
• long-term budget planning, and
• targeted expenditure in priority sectors.

The extension of the excise–cess regime also strengthens the government’s regulatory hand, enabling tighter control over manufacturing, packaging, and distribution of harmful products.