Cigarette, pan masala tax overhaul: What is Health & National Security Cess and how it will work
The government is preparing to introduce a Health and National Security Cess Bill, signalling a major shift in the way taxes are levied on cigarettes, gutkha and pan masala.
Sharing the details of the Bill, to be introduced on Monday, December 1, by Finance Minister Nirmala Sitharaman, sources told CNBC-TV18 that the proposed cess will be imposed on the “production capacity” of manufacturers.
"This will include an assessment of machines, processes and all aspects linked to production rather than the actual output, which currently is declared by the manufacturers to plug the tax leakage."
Sources explained that "under the framework being drawn up, if a machine can manufacture 100 cigarettes and is operated three times a day, the cess will apply on 300 cigarettes per day, not just on 100".
Sources say the objective is to align taxation with manufacturing capability and to plug gaps created by variable production cycles.
The new levy will replace the compensation cess currently charged under the GST mechanism on these products.
