Tobacco, cigarettes will become expensive from February 1, apart from GST, excise duty will also be imposed.

People who smoke cigarettes have got a big shock on the very first day of the New Year. The Central Government has decided to impose excise duty on cigarettes and other tobacco products. This change will come into effect from February 1. Apart from excise duty on tobacco products, cess will also be imposed on pan masala. The excise duty imposed on these products will be in addition to the Goods and Services Tax (GST). Excise duty ranging from Rs 2050 to Rs 8500 per 1000 cigarettes will be imposed on different cigarettes, which means the price of every cigarette is sure to increase.

The government’s decision will impact a large population of India because at least 10 crore Indians smoke cigarettes. The Finance Ministry on Wednesday notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machine (Capacity Determination and Collection of Duty) Rules, 2026. Even before this notification, the share prices of tobacco product manufacturing companies like Godfrey Phillips and ITC Limited have fallen.

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What difference will it make?

Pan masala, cigarettes and other tobacco products are already in the 40% GST slab. Currently, apart from GST, compensation cess is also levied. Now excise duty will be imposed in place of this compensation cess. 18% GST is applicable on beedis. Now from February 1, Health and National Security cess will be imposed on Pan Masala and excise duty will be applicable on tobacco and its related products.

How much does the government earn from tobacco products?

According to the Tobacco Institute of India, at present the government earns about Rs 76 thousand crore in tax only from tobacco and its related products. Let us tell you that the standard of the World Health Organization (WHO) is that 75 percent of the retail price of cigarettes should be tax. Currently this share in India is 53 percent which is quite low.

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In the winter session of Parliament, the Central Government had approved the Central Excise (Amendment) Bill 2025. At that time Finance Minister Nirmala Sitharaman had said, ‘We definitely do not want cigarettes to become cheaper.’