Sources have told CNBC-TV18 that Finance Minister Nirmala Sitharaman will be introducing a “Health Security se National Security Cess” bill in the parliament today.
The cess will be on production capacity including machines, processes and all the aspects in production of cigarettes, gutkha and Pan Masala, according to the sources.
For example, if a machine makes 100 cigarettes and is run thrice a day, the tax will be on 300 cigarettes per day and not 100.
The new cess will replace the existing quantum of compensation cess
levied on cigarettes, gutkha and pan masala. Currently, tobacco products have 28% GST and the compensation cess, which ranges from 5% to 290% depending on the type and form of the product.
On the implementation of this cess, the GST on cigarettes, pan masala and gutkha will turn into 40% and the rest will be absorbed under the health and national security cess, but the tax incidence for the consumer remains the same.
However, sources have added that the government has the power to notify a hike in the rates of the two cesses and any other item cam also be added to the list in which the two cesses can apply.
ITC, VST Industries and Godfrey Phillips derive a significant amount of their topline from their respective cigarettes business. While ITC is a diversified conglomerate with business interests spanning across hotels, agri products, and paper, the other two companies still rely on cigarettes for majority of their topline.
Shares of ITC have declined 17% so far this year, while those of Godfrey Phillips are up 71%, even after a correction from their peak. On the other hand, shares of VST Industries are down 25% so far in 2025.
(The Cess Newsbreak Inputs Are From Timsy Jaipuria)