The finance ministry has specified the excise duty on cigarettes at Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on cigarette length, effective 1 February
With the Centre rolling out additional excise duties and a dedicated health and national security cess on products already taxed at the highest goods and services tax (GST) slab, new taxes on cigarettes, tobacco and pan masala products have taken effect from 1 February 2026.
The step marks the overhaul of taxation on sin goods. Under the notification, cigarettes, tobacco, pan masala and similar products will continue to attract a 40 per cent Goods and Services Tax (GST), while bidis will be taxed at 18 per cent. In addition to GST, pan masala will be subject to a Health and National Security Cess, while cigarettes and other tobacco products will face an additional excise duty.
The finance ministry specified the excise duty on cigarettes at Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on cigarette length, effective 1 February. The levy will be imposed over and above GST. Short non-filter cigarettes of up to 65 mm will face an additional duty of about Rs 2.05 per stick, while short filter cigarettes will be taxed at around Rs 2.10 per stick.
The ministry also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, outlining the framework for assessing and collecting duties from manufacturers.
The changes follow Parliament’s approval in December of two Bills enabling the levy of excise duty on tobacco products and a new cess on pan masala manufacturing. With the fresh levies coming into force, the GST compensation cess, currently charged at varying rates, has been discontinued from 1 February.
The Odisha government has imposed a comprehensive statewide ban on the manufacture, processing, packaging, storage, transportation, distribution and sale of all products containing tobacco or nicotine, including gutkha and pan masala.
The prohibition, notified by the Health and Family Welfare Department, follows directions from the Supreme Court of India and the Food Safety and Standards Authority of India (FSSAI) and applies across the entire supply chain.
Earlier, Indian retailers urged the government to reconsider a sharp increase in taxes on legally sold tobacco products, warning that the move could hurt small businesses and allow illegal operators to gain market share.
The Federation of Retailer Association of India (Frai) said it had asked authorities to lower the newly notified tax rates to protect small retailers and curb the risk of illicit trade expanding in the tobacco market.
