(MENAFN- KNN India) New Delhi, Dec 1 (KNN) The Centre is set to introduce two key bills in Parliament aimed at revising excise duties on tobacco products and levying a new cess on pan masala, as the GST compensation cess nears its expiry.

The Central Excise (Amendment) Bill, 2025 seeks to increase excise duties on tobacco and related items to preserve the current tax burden once the compensation cess is phased out.

A parallel proposal, the Health Security se National Security Cess Bill, 2025, introduces a new levy on pan masala and potentially other notified products to bolster resources for national security and public health.

As per the proposal, unmanufactured tobacco and tobacco refuse will attract an excise duty of 60-70 per cent, while cigars and cheroots will face a 25 per cent duty or Rs 5,000 per 1,000 units.

Non-filter cigarettes are slated to be taxed at Rs 2,700-4,500 per 1,000 sticks, and filter cigarettes at Rs 3,000-5,200, depending on size.

The new cess on pan masala will be linked to machine capacity at manufacturing units. For units producing up to 500 pouches per minute, cess rates will range from Rs 1.01 crore to Rs 8.49 crore annually, based on pouch weight.

The move comes as the GST compensation cess, earmarked for repaying pandemic-era borrowings of Rs 2.69 lakh crore, is expected to lapse by March 2026, or earlier if outstanding loans are settled.

Collections from the cess are estimated at Rs 1.67 lakh crore for the current fiscal.

Industry watchers note that the revised duty structure could weigh heavily on MSMEs operating in tobacco supply chains and small pan masala units working on narrow margins.

Higher excise duties and capacity-based levies may raise production costs, prompting smaller firms to consolidate or enhance compliance.

Traders and packaging MSMEs could also face reduced orders as manufacturers align operations with the new tax regime.

(KNN Bureau)

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