Govt to table bills replacing GST compensation cess on tobacco, pan masala

The Centre is set to introduce two key bills in the Lok Sabha on Monday to replace the existing GST compensation cess on tobacco, pan masala and other sin goods with new levies, ensuring that the overall tax burden on these products remains unchanged.

Finance Minister Nirmala Sitharaman is scheduled to table the Central Excise Amendment Bill, 2025, and the Health Security se National Security Cess Bill, 2025, according to the parliamentary list of business.

Sources said the Central Excise Amendment Bill, 2025, is aimed at replacing the GST compensation cess on tobacco by imposing a fresh excise duty on products such as cigarettes, thereby maintaining revenue neutrality after the compensation cess framework ends.

The second bill proposes a broader cess mechanism to continue taxing demerit goods traditionally subject to higher levies under GST, ensuring sustained funding for health and security-related expenditures.

The move comes as the compensation cess, introduced to support states during the GST transition, approaches its phase-out, prompting the government to craft alternative tax structures for high-revenue sin goods.