New Delhi | The Lok Sabha on Friday passed a bill to levy a cess on manufacturing units of pan masala, and utilise the fund for strengthening national security and improving public health.

Replying to the debate on the Health Security se National Security Cess Bill, 2025, Finance Minister Nirmala Sitharaman said the cess will be shared with the states, as public health is a state subject.

The bill was later passed by voice vote by the Lok Sabha.

The bill seeks to augment the resources for meeting expenditure on national security and for public health by levying a cess on the machines installed or other processes undertaken to manufacture pan masala and similar goods.

The purpose of the bill is to create a "dedicated and predictable resource stream" for two domains of national importance -- health and national security, she said.

Sitharaman said pan masala will be taxed at the maximum 40 per cent rate under Goods and Services Tax (GST) based on its consumption, and there will be no impact of this cess on GST revenues.

The proposed Health and National Security Cess, which will be over and above the GST, will be levied on the production capacity of machines in pan masala manufacturing factories.

She further said that the cess as a percentage of gross total revenue was 6.1 per cent in the current fiscal, lower than 7 per cent between 2010-2014.