Central Excise (Amendment) Bill 2025: Replaces GST compensation cess on tobacco products

Key facts

• Finance minister Nirmala Sitharaman is expected to introduce the Central Excise (Amendment) Bill, 2025, which proposes changes to the Central Excise Act, 1944.
• The bill will replace the current GST compensation cess on cigarettes, chewing tobacco, cigars, hookahs, zarda and scented tobacco.
• The Central Excise (Amendment) Bill, 2025, aims to give the government the fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence after the GST compensation cess ends.
• The Health Security se National Security Cess Bill, 2025, seeks to levy a new cess on machines or processes used in the manufacture of pan masala and other notified goods.
• The Health Security se National Security Cess Bill, 2025, will replace the compensation cess on pan masala.
• The proposed health–security cess is meant to augment the resources for meeting Security expenditure on national security and for public health.
• The proposed health–security cess will apply in addition to all other taxes.
• The GST compensation cess, introduced in 2017 for five years to offset states’ revenue loss, was extended till March 31, 2026, to repay the Centre’s Covid-era borrowing.