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Cigarettes, pan masala to attract addition excise duty from February 1
Jan-02-2026

The government of India has made amendments to the Central Excise Act, levying an additional excise duty on cigarettes and other tobacco products effective February 1. This duty will be over and above 40% GST. Besides, it has imposed cess on the manufacturing capacity of pan masala-related businesses under the Health and National Security Cess Act. The total tax incidence on pan masala, after taking into account 40% GST, will be retained at the current level of 88%. The revised tax structure replaces the existing regime of 28% GST, along with a compensation cess on tobacco and related products. 

Under the new tax structure, short non-filter cigarettes (up to 65 mm) will attract an additional duty of about Rs 2.05 per stick over and above 40% GST, while short filter cigarettes of the same length will be charged around Rs 2.10 per stick. Further, medium-length cigarettes (65-70 mm) will face an additional duty of around Rs 3.6-4 per stick, and long, premium cigarettes (70-75 mm) about Rs 5.4 per stick. Meanwhile, the cigarettes that come under ‘other’ category carries a significantly higher duty of Rs 8,500 per 1,000 sticks. This applies only to unusual or non-standard designs and most popular cigarette brands do not fall under this slab. Moreover, chewing and jarda scented tobacco, and gutkha will attract an excise duty of 82%, and 91%, respectively.

Since July 2017, the taxes on cigarettes in India have remained unchanged, contrasting to global best practices and public health guidance, which emphasize annual increases in duties to ensure that cigarette prices rise faster than incomes. As per World Bank estimates, India’s total tax incidence on cigarettes is around 53% of the retail price, which is substantially lower than the World Health Organization’s (WHO) recommended benchmark of 75% or more for achieving meaningful reductions in tobacco consumption. The countries like the United Kingdom and Australia tax cigarettes at well over 80-85% of the retail price, while France, New Zealand, and several EU member states maintain tax incidence levels exceeding 75-80%. Besides, over the past decade middle-income countries, such as Turkey, South Africa, the Philippines, and Chile, have too raised their cigarette taxation to levels approaching or exceeding the WHO benchmark.
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