Parliament Winter Session: FM Sitharaman Tables Central Excise Bill, Health Security To National Security Bill

Finance Minister Nirmala Sitharaman on Monday introduced Central Excise Duty Bill, Health Security To National Security Bill on the first day of Winter Session of Parliament. The session of Parliament opens with the government planning two tax bills aimed at so-called sin goods. These measures target tobacco and pan masala, and are designed to keep the present tax load steady when the current GST compensation cess on these products ends in December.

Finance minister Nirmala Sitharaman is expected to introduce the Central Excise (Amendment) Bill, 2025, along with the Health Security se National Security Cess Bill, 2025, in the Lok Sabha. Together, the proposals are structured to take over from the outgoing cess framework linked to the Goods and Services Tax.

Central Excise (Amendment) Bill, 2025 and GST compensation cess background
The GST compensation cess began in 2017 for five years to make up states' revenue losses after GST rolled out. It was later continued until 31 March 2026 so the Centre could repay borrowing taken during the Covid period. That borrowing is expected to be fully repaid in December.

In September, the GST Council decided the compensation cess would continue only on tobacco and pan masala until Covid-related loans were cleared. The cess on luxury products ended on 22 September. Those items shifted to a simpler GST arrangement, with slabs of 5%, 18% and a 40% rate for ultra-luxury and demerit goods.

Central Excise (Amendment) Bill, 2025 and tobacco taxation details

The Central Excise (Amendment) Bill, 2025, changes the Central Excise Act, 1944 to replace the GST compensation cess on cigarettes, chewing tobacco, cigars, hookahs, zarda and scented tobacco. It seeks, in its wording, "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".

The new plan ensures that once the compensation cess stops, the effective tax burden on tobacco and pan masala will not fall. Instead of relying on the old GST-linked levy, the government would use central excise and a separate cess to maintain revenue from these products.

Central Excise (Amendment) Bill, 2025 and health-security cess on pan masala

The Health Security se National Security Cess Bill, 2025, will replace the compensation cess on pan masala. According to the draft, the objective is to "augment the resources for meeting Security expenditure on national security and for public health, and levy a cess for the said purposes on the machines installed or other processes undertaken by which specified goods are manufactured or produced".

This health-security cess will sit on top of all existing taxes. Manufacturers must file self-declared details of every machine or production process at each plant. Authorities will then compute the cess separately for every location, tying the levy to the scale of installed manufacturing capacity and notified processes.

Central Excise (Amendment) Bill, 2025 and other key legislative business
Alongside the Central Excise (Amendment) Bill, 2025, the government has listed thirteen more bills for discussion during the session. These include planned changes covering insolvency, highways, atomic energy, insurance, higher education, corporate law, securities markets and arbitration rules, indicating a crowded economic and regulatory agenda.

The Lok Sabha business schedule also sets aside specific debating time. The Central Excise (Amendment) Bill, 2025, has six hours earmarked, while the Manipur GST (Second Amendment) Bill, 2025, receives three hours. These allocations underline the priority given to tax changes as the compensation cess framework moves towards its closure.