Parliament has enacted the Health Security se National Security Cess Act, 2025, a new legislation aimed at augmenting resources for national security and public health, through the levy of a machine-based cess on specified goods, as notified in the Gazette of India Extraordinary dated December 16, 2025.
The Act received the President's assent on December 15, 2025 and will come into force on a date to be notified by the Central Government.
What Is the Objective of the New Cess?
The Act seeks to generate additional revenue to fund:
- National security expenditure, and
- Public health initiatives,
by imposing a cess on machines installed or processes undertaken for manufacturing or producing specified goods, rather than on output value alone
Who Will Be Liable to Pay the Cess?
Under Section 3 of the Act, a "taxable person" includes any individual or entity that:
- Owns, possesses, leases, operates, or controls manufacturing machines, or
- Undertakes any process resulting in the production of specified goods,
even if manufacturing is done through job workers or hired labour. Importantly, liability applies irrespective of actual production volume or any concessional tax scheme opted under other laws
How Will the Cess Be Calculated?
The cess will be computed based on:
- Rated speed of the machine (pouches/tins per minute),
- Weight of goods packed, and
- Type of process or machine used,
as specified in Schedule II of the Act. The levy will be monthly and payable for each machine installed in a factory
For goods manufactured entirely by manual process, a separate fixed monthly cess applies, regardless of production capacity.
In Addition to Existing Taxes
The cess levied under this Act will be in addition to GST, excise duty, or any other applicable tax or duty, and will first be credited to the Consolidated Fund of India, after which it may be appropriated by Parliament for designated purposes
Mandatory Registration, Declarations and Returns
Key compliance requirements include:
- Mandatory registration with jurisdictional officers for all taxable persons
- Self-declaration of machines and technical parameters
- Monthly payment of cess by the 7th of each month
- Monthly return filing, with a two-year outer limit for belated returns
Authorities have been empowered to scrutinise returns, conduct audits, inspect premises, and verify machine calibration
Stringent Penalties, Arrest and Confiscation Powers
The Act introduces strict enforcement provisions, including:
- Penalties up to 100% of cess evaded in fraud cases
- Interest at 15% per annum for delayed payment
- Imprisonment up to five years in serious offences involving large evasion
- Powers of search, seizure, confiscation, and arrest, with certain offences being cognizable and non-bailable
Appeals and Legal Remedies
Taxpayers may file appeals before:
- Appellate Authority,
- CESTAT,
- High Court, and
- Supreme Court,
subject to mandatory pre-deposit conditions. The Act also provides for compounding of offences in specified cases
Why This Law Matters
Tax experts believe the new cess regime signals a shift towards capacity-based taxation, especially for sectors dealing in high-risk or socially sensitive goods, while ensuring steady funding for national security and health priorities.
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