India to Share Pan Masala Cess Revenue with States in Bid for Better Health Outcomes
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New Delhi - In a significant move towards cooperative federalism, Union Finance Minister Nirmala Sitharaman announced on Thursday that the revenue generated from a proposed capacity-based cess on pan masala will be shared with states to fund health-related initiatives. The Finance Minister introduced two separate bills in the Lok Sabha - the Central Excise (Amendment) Bill, 2025 targeting tobacco and its products, and the Health Security National Security Cess Bill, 2025 on pan masala. She explained that the cess was necessary as excise duty cannot be levied on pan masala based on capacity. In a unique approach, Sitharaman assured that the cess revenue will be shared with states through a scheme, marking a departure from the usual practice where cess revenue is not shared with states as it is not part of the divisible pool of taxes. The Finance Minister also addressed concerns over the impact of the demerit goods levy on tobacco farmers, reassuring that several schemes are in place to support their welfare. She cited the Crop Diversification Programme under the Rashtriya Krishi Vikas Yojana, which has led to over 1.12 lakh acres of land being shifted from tobacco to other crops between 2017-18 and 2021-22 in 10 major tobacco-growing states. In response to issues raised by Trinamool Congress MP Sagarika Ghose regarding the Mahatma Gandhi National Rural Employment Guarantee Scheme in West Bengal, Sitharaman clarified that the state government is responsible for ensuring transparency and accountability in the scheme's implementation. She added that the Centre had released ₹54,416 crore under the scheme between 2014-15 and 2021-22, a significant increase from the ₹14,985 crore released during the previous government's tenure. The Finance Minister also refuted charges of ignoring West Bengal, pointing out that the state government has withdrawn from the Ayushman Bharat Scheme and industries are leaving the state. She highlighted that the Centre has provided a significant increase in tax devolution to West Bengal since 2014, with ₹5.94 lakh crore provided as tax devolution, a 4.4 times increase compared to the previous period.
