New Delhi [India], December 12 : The Government has notified the Central Excise (Amendment) Act, 2025, effecting a substantial increase in excise duties on unmanufactured tobacco, manufactured tobacco, tobacco products, and tobacco substitutes.
Under the Central Excise Act, 1944, excise duty on cigarettes ranges between 200 and 735 rupees per thousand sticks. The amended Act raises this range sharply to between 2,700 rupees and 11,000 rupees per thousand cigarettes.
The Act enhances excise duties and cess across products, including cigarettes, cigars, hookah tobacco, chewing tobacco, zarda and scented tobacco. It also grants the government fiscal space to raise central excise duty even after the cessation of the tobacco cess.
The new law also prescribes higher duties for manufactured tobacco. Duty on chewing tobacco will rise from 25 per cent to 100 per cent, while duty on hookah tobacco will go up from 25 per cent to 40 per cent. For smoking mixtures used in pipes and cigarettes, the duty has been increased from 60 per cent to 325 per cent.
The government says the legislation aims to protect people from the harmful effects of tobacco and curb its consumption.
Earlier, replying to the debate in the Rajya Sabha, Finance Minister Nirmala Sitharaman said higher duties on cigarettes would be shared with the states, clarifying that the levy is an excise duty and not a cess.
Sitharaman had assured the house that tobacco farmers and beedi workers would not be adversely affected. The Minister highlighted several schemes, including crop diversification programmes, to support farmers shifting away from tobacco.
She informed the House that over 1.12 lakh acres of land moved away from tobacco cultivation to other crops between 2017-18 and 2021-22. She added that 49.82 lakh beedi workers are registered in the country and are covered under labour welfare schemes.
The Minister also pointed out that India's total tax incidence on cigarettes is about 53 per cent of retail price, against the World Health Organization's benchmark of 75 per cent. She said tax fixation under the new Act aligns with WHO guidance and aims to make cigarettes less affordable. According to her, even after GST and the accompanying cess were introduced, taxes on tobacco products had not reached the WHO's benchmark, keeping their affordability high and undermining public-health objectives.
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