Pan Masala Manufacturers Need Registration Under Health And Security Cess Law From Feb 1

Pan masala manufacturers need to apply for registration under the health and national security cess law immediately after it comes into effect from Feb. 1, the finance ministry said on Friday.

For manufacturers who have machines installed in more than one factory, separate registration shall be required for each factory, and they have to apply on the Automation of Central Excise and Service Tax (ACES) portal, according to an explanation under the FAQ (frequently-asked questions) issued by the finance ministry.

Such businesses will have to file the declaration on the ACES portal within seven days of the grant of registration. This declaration must specify the parameters of your machines (maximum rated speed, weight of specified goods, etc) relevant for the computation of the cess.

Tax officers will conduct physical verification of the factory and machines within 90 days of the filing of the initial declaration.

To a query on when an existing pan masala manufacturer should apply for registration under the Cess act, the FAQ said: "You must apply for registration immediately upon the commencement of the Act and the HSNS Cess Rules, i.e., on 1st February, 2026".

Since the liability to pay cess begins from that date, businesses must submit the registration application on the portal at the earliest.

"Your registration certificate will be effective from the date you become liable, which for existing manufacturers is 1st February, 2026," the FAQ said.

Once a business applies for registration, the application is deemed to have been approved in case a tax officer fails to take action within seven working days.

Such manufacturers can pay the cess liability after obtaining the temporary registration number upon successful submission of the registration application.

The Act requires that the cess be collected from every taxable person at the beginning of each month, but no later than the 7th day of that month.

Failure to do so would attract a penalty of at least Rs 10,000.

Such manufacturers will have to install a CCTV system covering all packing machines and manual process units. The footage must be preserved for 24 months and provided to officers within 48 hours upon request.

For new applicants who already own or control machines on 1st February, 2026, the cess payment may be done on the portal by utilising the temporary registration number, even if the registration certificate (which shall be issued within seven working days) is still being processed, the FAQ said.

The finance ministry on Jan. 1 notified rules under the Health and National Security Cess Act. The law mandates pan masala manufacturers to pay a cess on their manufacturing capacity on top of the highest 40 per cent Goods and Services Tax (GST) rate effective Feb. 1. The total tax incidence will be at the existing level of 88%.

Currently, 28% GST plus a compensation cess is levied on pan masala.

As per the rules, the cess will be calculated and payable on a monthly basis based on the number of packing machines installed and their maximum packing speed.

If a registered person adds or installs a new machine in the middle of a month, the cess payable for that new machine is required to be paid fully for that entire month within five days of such addition or installation, the FAQ said.