Central government hikes excise after seven-year freeze.
The Central Government has announced a hike on cigarette and other tobacco products like pan masala. The move comes as the government rolled out a sweeping overhaul of the excise duty framework, citing rising public-health costs and sustained revenue erosion in the sector. The additional excise duty on cigarettes will be based on their length, ranging from ₹2,050 to ₹8,500 per 1,000 sticks. The excise duty will be applied on top of the existing 40% GST on cigarettes. Additionally, the GST compensation tax will be removed from that date. Bidis will continue to attract a lower GST rate of 18%. Pan masala and chewing tobacco will face extra levies under the Health and National Security Cess.
Cost of cigarettes after February 1
After the new excise duty takes effect, a cigarette currently priced at ₹18 per stick is expected to cost around ₹21 to ₹22. This reflects an increase of nearly 15–20%, depending on how companies pass on the tax burden to consumers. This will affect the daily smokers the most.
Why this step?
Parliament approved new laws which allowed the government to impose excise duty on tobacco and a special cess on pan masala. The goverment sees higher tobacco taxes and special cess as a public health measure to discourage smoking and consumption of pan masala.
Impact on tobacco companies
The announcement of fresh excise duty triggered a sharp reaction in the stock market. As per the analysts, the companies will have to raise the prices by up to 15% to offset the impact of new excise duty. Cigarettes contribute a large share of revenue for these firms.
Public health in focus
India continues to face a high health risk from smoking-related diseases, tobacco-related diseases, particularly cancer, are placing an increasing financial strain on the public healthcare system. The government aims to reduce tobacco consumption over time. For younger users and first-time smokers, the hiked prices will make tobacco less affordable.
