Many opposition MPs claim new cess bill will hurt MSME sector, revive 'inspector raj'

New Delhi, Dec 4 (PTI) DMK MP Sumathi on Thursday accused the Centre of relying excessively on cesses to raise revenue. This is "cessification of governance, not justification of governance", she said while participating in a debate on the Health Security se National Security Cess Bill, 2025.

Moving the proposed legislation in the Lok Sabha on Thursday, Finance Minister Nirmala Sitharaman said its purpose is to create a "dedicated and predictable resource stream" for two domains of national importance -- health and national security.

However, RJD member Sudhakar Singh wondered how the imposition of cess would prevent the consumption of tobacco and pan masala. On the lines of Bihar, the production and sale of pan masala and related products should be banned, he demanded.

Criticising the bill, Sumathi pointed out that the Union finance minister herself noted how sharply cess revenues have risen. "Ambedkar had warned that good intentions are of no value if the instruments are flawed. This bill is precisely that -- good intentions trapped in a flawed instrument," she said and claimed that Micro, Small, and Medium Enterprises (MSMEs) would be "hit the hardest" by it.

"This is cessification of governance, not justification of governance," the DMK MP said.

Opening the debate in the Lok Sabha, Congress MP Varun Chaudhary warned the proposed legislation would revive "inspector raj" and argued that a capacity-based cess would increase bureaucratic interference. "What will happen to small factories?" he wondered and urged the government to send the bill to a select committee to fix its "many shortcomings".

BJP MP Jagdambika Pal defended the proposed bill, saying Parliament should welcome a bill that brings "full accountability" on how cess proceeds are spent. "This is perhaps the first bill where we are committing to show where every paisa collected from a demerit good will go," he said.

Terming health and national security the country's highest priorities, Pal added: "For the first time, a guarantee for both has been brought through one legislation." He cited Ayushman Bharat to claim that India has become the only country after the United States to provide large-scale health cover.

Samajwadi Party MP Virendra Singh claimed the political atmosphere in the country has become such that "if we say anything against the bill, it will be called treason". He, however, supported the proposed cess, saying it is meant for national security and would not be diverted elsewhere.

However, TMC MP Saugata Roy questioned whether the cess would deter the pan masala industry, as he noted its enormous profits. Referring to a high-profile raid, he said, "Pan masala is a big business... Rs 196 crore was discovered in one operation. Top film stars endorse these products." He argued that the government was "so desperate for funds" that it was now depending on demerit goods to finance national security.

"You need money — the Parliament building cost Rs 20,000 crore, the Prime Minister’s 'Sewa Teerth' will cost hundreds of crores. Now, for that, take money from pan masala? The government is thinking on two lines: on one hand, it spends money like water on unnecessary buildings; on the other, it taxes pan masala to fund security," Roy said.

The new complex housing the Prime Minister's Office (PMO) will be called 'Seva Teerth'. The complex, which is in the final stages of completion, was earlier known as the 'Executive Enclave' under the Central Vista Redevelopment project.

As the Trinamool Congress MP criticised spending on the new Parliament building, the Chair Jagdambika Pal reminded him that Parliament infrastructure falls under the Speaker's domain, saying: "It means you are criticising the Speaker." BJP MP Nishikant Dubey raised a point of order, saying the opposition MP had improperly named individuals. He argued the new Parliament building was necessary, claiming that CPWD had stopped issuing safety certificates for MPs' current accommodations.

“Even the building he (Roy) lives in does not have a safety certificate... so this construction was the need of the hour,” he said.

Sitharaman said pan masala will be taxed at the maximum 40 per cent rate under Goods and Services Tax (GST) based on its consumption, and there will be no impact of this cess on GST revenues.

The proposed Health and National Security Cess, which will be over and above the GST, will be levied on the production capacity of machines in pan masala manufacturing factories. PTI NAB UZM UZM NSD NSD