New year, Higher prices: Excise duty on Tobacco products and pan masala hiked

From February 1 , cigarettes and other tobacco products will become costlier as the government imposes higher excise duties and a health and national security cess on pan masala. The move is aimed at discouraging tobacco use and bringing India’s cigarette taxes closer to global best practices.

Under the revised Central Excise Act , cigarettes will attract an additional duty of Rs 2,050 to Rs 8,500 per 1,000 sticks , depending on length and type, on top of 40 per cent GST . Short and medium-length cigarettes will face smaller hikes, while premium and non-standard designs will see the steepest increase. Chewing tobacco, jarda, and gutkha will also become pricier under the higher excise rates.

A health and national security cess will be levied on pan masala manufacturing, keeping the total tax incidence at 88 per cent . Manufacturers must install CCTV systems on packing machines , retain footage for 24 months , and report machine capacities to excise authorities.

For consumers, the price impact will be substantial. A typical 20-cigarette pack of common mid-range brands that now sells for around ₹250-₹300 could rise by ₹70-₹90 , taking the price to roughly ₹320-₹390 per pack . Even lower-priced packs currently at about ₹100 may jump by ₹70-₹80 , pushing their price to around ₹170-₹190 .

Officials said the hike addresses public health concerns, as India’s current taxes on cigarettes, about 53 per cent of retail price , lag behind the WHO-recommended 75 per cent . Countries like the UK, Australia, and New Zealand tax cigarettes at over 75 per cent, and India aims to gradually close that gap.

The revised taxation replaces the old 28 per cent GST plus compensation cess system , which had been extended to repay a Rs 2.69 lakh crore loan to states for GST revenue losses during the COVID-19 pandemic. The government expects these measures to discourage tobacco consumption while boosting revenue, effective February 1 .