Health & National Security Cess, New Excise Regime to Kick In from Feb 1, 2026

The Union Finance Ministry on December 31 notified February 1, 2026 as the appointed date for implementing the Health se National Security Cess Act and the Central Excise (Amendment) Act.

Objective of the New Laws
The two legislations aim to retain and restructure high taxation on tobacco and related ‘sin goods’ even after the rationalisation of GST rates.

• Health se National Security Cess Act: Introduces a cess on pan masala.
• Central Excise (Amendment) Act: Imposes an additional central excise duty on cigarettes and other tobacco products, replacing the existing GST compensation cess.

Revised Tax Structure on Tobacco Products

• From February 1, 2026:
  • Pan masala, cigarettes, tobacco and similar products: 40% GST
  • Biris: 18% GST
• In addition:
  • Health se National Security Cess on pan masala
  • Additional excise duties on cigarettes and tobacco products over and above GST

Excise Duty Rates Announced

• Cigars / cheroots / cigarettes: ₹5,000–₹11,000 per 1,000 sticks (depending on length)
• Unmanufactured tobacco: 60–70%
• Nicotine and inhalation products: 100%

Use of Revenue

• Excise duty on tobacco products collections will form part of the divisible pool of taxes shared with states.
• Health se National Security Cess proceeds form Pan masala will be earmarked for public health initiatives, national security, and sustaining high taxation on harmful products.

New Rules for Gutkha and Chewing Tobacco
The ministry also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, strengthening monitoring and duty collection mechanisms.

Background: GST Rationalisation
After GST restructuring, India now has three GST slabs — 5%, 18% and 40%. Tobacco products remain the only category taxed at the highest rate, reflecting the government’s continued deterrence-based approach towards consumption of harmful goods.