Health Security & National Security (HSNS) Cess: Capacity-Based Levy on Pan Masala

The Health Security & National Security (HSNS) Cess Act, 2025 introduces a new, self-contained cess regime intended to mobilise resources for national health security as well as broader national security objectives. This levy operates independently of GST and other existing indirect tax laws and follows its own charging provisions, Schedules, procedures and appellate framework.

This article explains the scope, nature and compliance requirements of HSNS Cess in a practical, structured manner for assessees engaged in the manufacture of Pan Masala.

Effective date: HSNS Cess becomes operational from 1 February 2026 and, as of now, applies only to Pan Masala falling under CTH 2106 90 20.

Statutory Basis and Policy Purpose

The Health Security & National Security (HSNS) Cess Act, 2025 is a special-purpose enactment designed to create an earmarked pool of funds for:

  • financing national health security initiatives; and
  • meeting national security requirements.

Key characteristics of this cess:

  • It is a standalone levy, not subsumed in GST or any other indirect tax law.
  • Its operation is governed solely by:
    • the charging provisions in the HSNS Cess Act, 2025,
    • Schedule I (to identify goods on which cess applies),
    • Schedule II (for capacity-based levy), and
    • Rules that the Central Government is empowered to frame under the Act.
  • Liability, procedures, and remedies are to be understood strictly with reference to this Act and its delegated legislation.

Scope of Goods Covered and Commencement of Levy

Goods Currently Notified

Under Schedule I of the HSNS Cess Act, 2025, the cess is currently imposed only on:

  • Pan Masala classified under CTH 2106 90 20 of the First Schedule to the Customs Tariff Act, 1975.

No other product is presently subject to HSNS Cess. The levy is thus highly specific at inception, targeted exclusively at the Pan Masala sector.

Date of Effect

  • The cess becomes effective from 1 February 2026.
  • HSNS Cess is applicable on and from this date on eligible clearances/production, subject to the capacity-based mechanism outlined in Schedule II.

Power to Expand Coverage

The Act authorises the Central Government to notify additional goods in the future. However:

  • No cess can be imposed on any item unless that specific product is expressly notified under the Act.
  • Till such notification is issued, only Pan Masala (CTH 2106 90 20) remains within the ambit of HSNS Cess.

Note: The scope of HSNS Cess is notification-driven. Assessees in allied sectors should continuously monitor notifications issued under the HSNS Cess Act, 2025.

Relationship with GST and Other Taxes

Independent Levy Over and Above GST

The HSNS Cess is distinct and additional to all other indirect taxes. In particular:

  • HSNS Cess is charged in addition to GST @ 40% (as currently applicable to Pan Masala) and any other duties/cesses or local levies.
  • The liability to pay HSNS Cess is completely separate from GST liability.

No Set-off or Substitution

  • Payment of GST does not reduce, offset, or substitute the obligation to pay HSNS Cess.
  • The cess is not an input tax credit mechanism; it is a direct levy based on capacity, payable in the manner prescribed under the HSNS Cess Act, 2025.

Practical implication: An assessee manufacturing Pan Masala will be required to discharge:

  • GST at applicable rates, and
  • HSNS Cess as per capacity-based computation under Schedule II,
    each governed by its own procedural framework.

Administrative Machinery and Proper Officer

Administration by CBIC Officers

The day-to-day implementation and enforcement of HSNS Cess is entrusted to officers under the Central Board of Indirect Taxes and Customs (CBIC).

  • All verification, assessments, adjudications, recovery actions, audits and enforcement measures related to HSNS Cess will be carried out by these officers.

Notification of “Proper Officer”

While the Act has vested powers in CBIC officers, the specific designation of “proper officer” for HSNS Cess purposes is awaited.