New Delhi [India], January 1 : The Ministry of Finance has notified a major revision in excise duty on cigarettes and tobacco products, effective February 1, 2026.
According to the notification issued on Wednesday, the government has imposed additional excise duty on cigarettes in the range of Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on the length and type of the product.
The duty will be levied over and above the existing 40 per cent Goods and Services Tax (GST) on tobacco and similar product.
This duty raise comes close on the heels of Parliament passing a Bill aimed at increasing excise duty on tobacco products and their manufacturing.
The Central Excise (Amendment) Bill, 2025, passed by the Parliament recently, aimed at revising excise duties on tobacco and related products after the expiry of the GST compensation cess.
Finance Minister Nirmala Sitharaman had said that the revenue collected will go to the divisible pool, and will be redistributed again (at the 41%) with the States.
"Many members here made the comment that this is a cess. Excise is not a cess. Excise duty existed before GST. Compensation cess is reverting back to the Centre to be collected as Excise duty, which will be redistributed to the States at the 41% allocated," she had said in the parliament.
Many countries revise tobacco taxes annually, while many link it with inflation, she noted. "Even in India, prior to GST, tobacco rates were increased annually. This was primarily due to health-related concerns, as higher prices or taxes were intended to act as a deterrent so that people would not get into the habit," she said.
The government is bringing back the excise duty which existed priority to the GST system, she said.The minister said because of various initiatives taken by the government, acreage under tobacco cultivation of over 1.12 lakh acres (45,323 hectare) moved to other crops between 2018 to 2021-22. It has shifted to sugarcane, groundnut, oil palm, cotton, chilli, maize, onion, pulses, and turmeric, she had said.
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