The Health Security & National Security (HSNS) Cess Act, 2025 introduces a standalone statutory cess aimed at funding national health security and national security needs, operating independently of GST and other indirect taxes. The cess is presently applicable only to Pan Masala classified under CTH 2106 90 20, as listed in Schedule I, and the levy takes effect from 1 February 2026. While the Act enables the Central Government to notify additional goods, no cess can be levied on any product unless specifically notified under the Act. HSNS Cess is charged in addition to GST (including the stated 40% rate) and other applicable taxes, and GST payment does not substitute or reduce cess liability. The administration is entrusted to CBIC officers, though the specific “proper officer” empowered for verification, assessment, adjudication, recovery, audit, and enforcement is yet to be notified. Registration under the HSNS Cess Act is mandatory for every person manufacturing or producing Pan Masala liable to pay the cess, irrespective of GST registration; non-registration is an offence attracting prosecution and penalties. The levy is capacity-based under Schedule II, determined by the number, type, and capacity of packing machines, requiring a declaration of machine details which will be verified by the proper officer. Importantly, cess liability is not linked to actual production quantity and applies even to manual production once Schedule II triggers. Payment must be made in advance on a monthly basis by the 7th of each month. The Act also contemplates Rules for procedures and abatements, including abatement for closures of 15 days or more. Time limits are prescribed for recovery (24 months) and adjudication (one year extendable). A full appellate and revisional framework is provided, with CESTAT as the Appellate Tribunal.
- Statutory Framework and Objective
The Health Security & National Security (HSNS) Cess Act, 2025 provides for the levy and collection of a dedicated-purpose cess to fund national health security and national security requirements.
The HSNS Cess is a standalone statutory levy, distinct from GST and other indirect taxes, and is governed strictly by the charging provisions, Schedules, and procedural framework laid down in the Act and the Rules to be framed thereunder.
- Goods Covered and Date of Levy
As specified in Schedule I to the HSNS Cess Act, 2025, the cess is presently leviable only on Pan Masala falling under CTH 2106 90 20 of the First Schedule to the Customs Tariff Act, 1975.
The levy is effective from 1 February 2026 onwards.
The Act empowers the Central Government to notify additional goods for levy of HSNS Cess; however, at present, only Pan Masala attracts the cess.
No levy can be imposed on any other goods without a specific notification issued under the Act.
- Nature of Levy – In Addition to GST and Other Taxes
HSNS Cess is levied in addition to GST @ 40% and other applicable taxes.
Liability under the HSNS Cess Act is independent of GST liability.
Payment of GST does not affect or substitute payment of HSNS Cess.
The cess must be discharged strictly in the manner prescribed under the Act.
- Administration and Proper Officer
Administration of HSNS Cess is vested in officers of the Central Board of Indirect Taxes and Customs (CBIC).
The proper officer authorised to exercise statutory powers relating to verification, assessment, adjudication, recovery, audit, and enforcement, etc., is yet to be notified by the Government.
- Registration Requirement
Registration is mandatory under the HSNS Cess Act, 2025.
Every person engaged in the manufacture or production of Pan Masala and liable to pay HSNS Cess must obtain registration under this Act, irrespective of GST registration.
Non-registration is an offence, liable for prosecution and penal consequences, as provided in the Act.
Procedural requirements relating to registration are to be prescribed by Rules, which are yet to be framed.
- Manner of Levy – Schedule II (Capacity-Based Levy)
HSNS Cess is levied in terms of Schedule II to the Act, which provides for a capacity-based levy.
The cess payable is determined with reference to the number, type, and capacity of packing machines, as specified in Schedule II.
The taxpayer is required to file a declaration regarding the number and details of machines installed in the factory with the proper officer, who shall verify the correctness of such declaration.
Cess as determined under Schedule II is payable both in cases of machine-based production and manual production.
The actual quantity of Pan Masala manufactured is not relevant, including in cases of manual production, once the levy is attracted under Schedule II.
- Payment of Cess – Advance Monthly Payment
The HSNS Cess is required to be paid in advance on a monthly basis.
The cess determined under Schedule II must be paid on or before the 7th day of every month.
Delay or default in payment attracts recovery proceedings and penal consequences as provided under the Act.
- Rules and Abatement on Closure
The Act empowers the Central Government to frame Rules for effective implementation; however, the Rules are yet to be framed.
The Rules are expected to prescribe procedures for registration, filing of declarations, payment of cess, verification of machines, abatement on closure of machines, and compliance requirements.
Abatement is envisaged where machines remain completely closed for a continuous period of 15 days or more, subject to conditions and verification by the proper officer.
- Recovery, Adjudication, and Limitation
The HSNS Cess Act contains specific statutory timelines:
Recovery of unpaid or short-paid cess can be initiated within 24 months from the date of filing of return.
Adjudication must be completed within one year, with a further extendable period of six months, as provided in the Act.
These provisions reflect legislative intent for certainty and time-bound resolution.
- Appellate and Revisional Remedies
The Act provides a complete appellate structure:
Appeals lie to the designated Appellate Authority against adjudication orders.
Revisional powers are provided as per the Act.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) is the Appellate Tribunal under the HSNS Cess Act.
Further appeals lie to the High Court and the Supreme Court, as applicable.
- Concluding Note
The Health Security & National Security (HSNS) Cess Act, 2025 establishes a strict, capacity-based cess on Pan Masala, with mandatory registration, advance monthly payment, declaration and verification of machines, penal consequences for non-registration, defined timelines for recovery and adjudication, and a complete appellate framework.
- Important Note
Taxpayers are advised to read the Act carefully for a clear and comprehensive understanding, as all rights, obligations, and safeguards flow strictly from the statutory provisions.
The views expressed are personal.
Author Bio
Good article covering all critical points. Thank you!