✔ The Union Finance Ministry has notified the provisions of the Health Security se National Security Act, 2025,which will come into force on February 1, 2026.
✔ This legislation marks a strategic shift by linking public health disincentives directly to national security funding.
✔ It also gave effect to The Central Excise (Amendment) Act, 2025 which specifies new rates of excise duty on to bacco products.
Key Features:
✔ The Act levies a new cess on pan masala and tobacco units.
✔ The Ministry states that general tax revenues have competing developmental priorities.
o This specific cess creates a non-lapsable, predictable financial stream for national security needs such as advanced equipment procurement and technological upgradation without burdening the general population.
● Tax Structure Overhaul that is Effective Feb 1, 2026:
✔ The existing GST compensation cess will be discontinued.
✔ New Tax Slabs:
o Beedis are moved to the 18% GST slab.
o Other Tobacco Productsaremoved to the 40% slab.
✔ For products like chewing tobacco, filter khaini, and gutkha, the GST value will now be determined based on the Retail Sale Price (RSP) declared on the package.
✔ Machine-Based Levy:
o To prevent tax evasion, new rules (Chewing Tobacco, Packing Machines Rules 2025) introduce a capacity-based levy on packing machines.
● Significance:
✔ The policy aims to correct the trend where cigarette affordability has stagnated.
o The goal is to ensure that real prices of tobacco products rise faster than consumer incomes.
✔ It establishes a direct pipeline from sin goodsrevenue to the defense ecosystem.
