HSNS Cess Rules Notified: Pan Masala Makers to Pay Levy Based on Installed Machines From Feb 1

The Ministry of Finance has notified the Health Security & National Security (HSNS) Cess Rules, 2026, on January 1, setting out the procedure for levying a new cess on machines installed and processes undertaken for the manufacture of pan masala.

The cess will come into force on February 1, 2026, and the collections will be used to fund national security and public health expenditure.

All existing pan masala manufacturers using such machines are required to register immediately once the Rules take effect on February 1.

New applicants who already have manufacturing machines installed as of that date may pay the cess using a temporary registration number while their registration certificate is under process.

The first cess payment, for February 2026, must be made by February 7, with the corresponding monthly return due by March 20. Thereafter, returns must be filed by the 20th of every succeeding month in Form HSNS RET-1.

For the first month of operation, the cess will be calculated on a pro-rata basis, depending on the number of days manufacturing activity actually took place.

The Rules require manufacturers to give at least three working days' prior intimation before uninstalling any manufacturing machine. They also provide for interest to be levied where a manufacturer understates the speed or other technical parameters of a machine.

The cess is not linked to the actual number of pouches produced. Even if a machine is deliberately run at a lower speed, the cess will be payable based on the machine's full capacity.

Even if a machine is deliberately run at a slower pace, the cess will still be based on what the machine is capable of at its peak. So, a machine that can produce up to 700 pouches per minute will attract cess at that level, even if it is actually operated at only 300 pouches per minute.

The Rules make it clear that “maximum rated speed” means the highest speed the machine can achieve, regardless of how it is used in practice or the weight of the goods being packed.

If an officer later finds that a manufacturer has understated this maximum speed or any other machine detail, the shortfall in cess will be recovered retrospectively, with the higher rate applied from the date the machine was installed or the details were changed.

The manufacturer will also be required to pay interest on the differential amount from the date the machine was installed or from the date the parameters were changed.

Abatement for non-operational machines

Manufacturers may claim abatement for non-operational machines only if a machine remains continuously shut down for at least 15 days. Intermittent closures do not qualify. For example, sealing a machine for 10 days, unsealing it for two days, and sealing it again for another 10 days will not meet the minimum requirement.

To claim abatement, manufacturers must give three working days' prior notice before shutting down a machine. A proper officer is required to physically verify the shutdown and officially seal the machine within three days. No manufacturing activity is permitted during the sealed period.

The Rules also require officers to verify each manufacturer's declarations within 90 days through a physical inspection of the factory, including verification of the technical specifications of machines such as their maximum rated speed.

Click here to read the Notification No. 01/2026 dated January 1 2026.

Click here to read the FAQ.

Click here to read the CBIC Flyer on HSNS.

Click here to read a copy of the Health Security SE National Security Cess Act, 2025.