The government has notified the Central Excise (Amendment) Act, 2025, significantly increasing the excise duty on all tobacco and its products. Under the Central Excise Act, 1944, cigarettes were subject to an excise duty ranging from ₹200 to ₹735 per thousand sticks. After the implementation of the amended law, this limit has been increased several times to ₹2,700 to ₹11,000 per thousand cigarettes.
Increase in Excise Duty and Cess
The Act increases excise duty and cess on all products, including cigarettes, cigars, hookah tobacco, chewing tobacco, zarda, and scented tobacco. Furthermore, the Act provides the government with fiscal space to increase central excise duty even after the tobacco cess is abolished.
The new law also increases the duty on manufactured tobacco. The duty on chewing tobacco will increase from 25 per cent to 100 per cent, while the duty on hookah tobacco will increase from 25 per cent to 40 per cent. The duty on smoking mixtures used in pipes and cigarettes has been increased from 60 per cent to 325 per cent.
The government explains the purpose of the law.
The government states that the purpose of this law is to protect people from the harmful effects of tobacco and curb its consumption. Earlier, responding to an ongoing debate in the Rajya Sabha, Finance Minister Nirmala Sitharaman said that the additional duty imposed on cigarettes will be shared with the states, and clarified that this duty is an excise duty, not a cess.
Tobacco farmers and beedi workers will not be affected.
Sitharaman assured the House that there will be no adverse impact on tobacco farmers and beedi workers. The Minister highlighted several schemes, including crop diversification programs, to support farmers moving away from tobacco cultivation. She informed the House that between 2017-18 and 2021-22, more than 1.12 lakh acres of land was converted to other crops instead of tobacco. He further stated that 49.82 lakh beedi workers are registered in the country and are covered under labour welfare schemes.
Total Tax on Cigarettes Still Below WHO Standards
The Minister also pointed out that the total tax on cigarettes in India is approximately 53 percent of the retail price, while the World Health Organization (WHO) standard is 75 percent. He stated that the taxation under the new Act is in line with WHO guidelines and aims to make cigarettes less affordable. According to him, even after the implementation of GST and associated cess, the tax on tobacco products has not reached the WHO standard, which has made them unaffordable and is harming public health objectives.
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