Tax Overdrive In Parliament: Manipur GST Reform, Steep Tobacco Duty Hikes, New National Security Cess Unveiled

Among a slew of economic bills laid before Parliament, the government has sought to initiate a significant reform for the state of Manipur with the Finance Ministry’s Manipur Goods and Services Tax (2nd Amendment) Bill, 2025, providing for the levy and collection of State GST (SGST) on intra-state supply of goods and services amidst Opposition uproar over the state facing neglect.

The Manipur GST tax Bill introduces a track-and-trace system to closely monitor how certain sensitive goods move through the supply chain. The Amendment Bill seeks to replace the Manipur GST (Amendment) Ordinance, 2025, which was promulgated on October 7 and had amended the Manipur Goods and Services Tax Act, 2017. The Ordinance aligned the Manipur Act with the amendments made to the Central Goods and Services Tax Act, 2017, by the Finance Act, 2025.

“This particular amendment is very important. It does two key things, both strong reform-based steps in GST, like the track-and-trace system,” Finance Minister Sitharaman said in Parliament during discussions on the Bill. “Even today, when we are trying to convert an ordinance into a regular Bill and get it passed here to become an Act, the Opposition is not here to participate,” Sitharaman said.

Key Clarifications & Compliance Changes

The amendment removes rules dealing with the “time of supply” for vouchers because issuing a voucher is not actually a supply of goods or services. This change will help avoid unnecessary disputes on when tax becomes payable. The amendment also clarifies the wording “plant or machinery” to “plant and machinery” to remove ambiguity for taxpayers while claiming input tax credit. To facilitate a seamless application of the changes, the correction is being applied retrospectively from July 1, 2017, to settle past disputes as well.

A 10 per cent pre-deposit will be required for appeals before the appellate authority or the appellate tribunal, even in cases where only the penalty is being challenged. This keeps the appeal process consistent and discourages frivolous litigation.

When goods kept in an SEZ or Free Trade Warehousing Zone are sold before being taken out of that zone, such transactions will now be treated as neither a supply of goods nor a supply of services, providing clarity and avoiding unintended tax implications.

Central Excise Amendment Targets Tobacco Revenue

Another Finance Ministry Bill before Parliament is the Central Excise (Amendment) Bill, 2025, which was introduced in Lok Sabha on December 1. The Bill seeks to amend the Central Excise Act, 1944, providing for the levy and collection of central excise duties on goods manufactured or produced in India.

Central excise duties on many items were repealed with the introduction of GST in 2017, except for certain items such as tobacco and tobacco products. Goods and Services Tax compensation cess was also introduced on products such as tobacco to compensate states for revenue loss due to the introduction of GST. Thus, tobacco and tobacco products are currently subject to GST, compensation cess, and central excise duty.

The compensation cess is planned to be discontinued. The Bill aims to revise the rate of central excise duty on tobacco and tobacco products to keep taxes on these products at the existing level. The Bill increases central excise duty on unmanufactured tobacco, manufactured tobacco, tobacco products, and tobacco substitutes.

For example, the Bill raises the duty on unmanufactured tobacco (such as sun-cured tobacco leaves) from 64 per cent to 70 per cent. While the Act levies an excise duty ranging between Rs 200 and Rs 735 per thousand cigarettes, the enhanced duty under the Bill ranges between Rs 2,700 and Rs 11,000 per thousand cigarettes.

The Bill also prescribes higher excise duties for manufactured tobacco products. For instance, the duty on chewing tobacco will increase from 25 per cent to 100 per cent. Duty on hookah or gudaku tobacco will increase from 25 per cent to 40 per cent. For smoking mixtures for pipes and cigarettes, the duty is proposed to be increased from 60 per cent to 325 per cent.

New National Security Cess Framework

Parliament also saw the introduction of the Health Security National Security Cess Bill, 2025, in Lok Sabha on December 1. The Bill proposes to levy a cess on the production of goods such as pan masala and any other goods that may be notified by the central government. Proceeds from the cess will be used for expenditure towards public health and national security.

The cess will be payable by a person who owns or controls machines or undertakes processes to manufacture the specified good and will be calculated per machine installed or per unit of manual production, and will be collected monthly. The obligated persons will be required to self-assess the payable cess and furnish a return. The Bill provides that interest will be payable on any cess that remains unpaid after the due date.

For machine-based production, the cess will be based on the maximum rated speed of each machine and the weight of the product packed in each pouch or container. For instance, cess will be Rs 1.01 crore per month per machine for a maximum rated speed of up to 500 pouches and each pouch weighing up to 2.5 grams.

The cess will increase to Rs 25.47 crore per month per machine where the maximum rated speed is between 1,001 and 1,500 pouches, and each pouch weighs above 10 grams. For wholly manual production, a fixed monthly cess of Rs 11 lakh per factory will be levied. The government may increase cess rates up to twice the specified amount if it is satisfied that such an increase is necessary in the public interest. Enhanced rates will be applicable for a specified period.

(Mukherjee is a contributing writer for ABP Live English)