New Delhi. The problems of the companies manufacturing tobacco products have increased due to the new central excise duty and new cess on cigarettes, pan masala and tobacco products. At the same time, the problems of people who consume tobacco and cigarettes may also increase because companies can increase the prices of cigarettes and other tobacco products. Actually, according to the notification of the Finance Ministry, additional excise duty and new cess will be applicable from February 1. After this, tax rates on tobacco products will increase significantly.
According to Finance Ministry sources, "The new tax structure on cigarettes will include 40% GST + new Central Excise Duty + existing NCCD (National Calamity Contingent Duty)." In such a situation, the tax rates on tobacco products will be higher than the current 54%. Let us tell you how much the tax burden will increase on cigarettes and other tobacco products?
What will be the total tax on cigarettes and tobacco?
According to the data given in the Gazette notification dated December 31, 2025, the tax burden on cigarettes is likely to increase to 66%. In such a situation, there will be a big impact on the profitability of companies manufacturing tobacco products.
How expensive will cigarettes be?
If companies making cigarettes and other tobacco products pass the tax increase entirely on the product, the price of an average cigarette is expected to increase by about 34%. In such a situation, a cigarette worth Rs 10 will become costlier by Rs 3.40 and it can be sold up to Rs 14 in retail, that is, directly you will have to pay Rs 14 for a cigarette worth Rs 10.
Will beedi prices also increase?
However, there is no mention about beedis in the notification issued by the government. Remember that beedis now attract lower GST (18%) but higher excise duty (10%) than before, resulting in the total tax burden being the same as before. This was announced by the Finance Minister in his speech during the discussion on the Central Excise (Amendment) Bill, 2025 in both the Houses. However, the excise on beedis has shifted from specific to ad valorem basis.
Also read- The story of a pizza seller becoming a billionaire, this plane crash became a shock and turning point; Now owner of Rs 1.19 lakh crore
RSP-based GST is applicable to all major tobacco products except beedis. This is not clear yet and when the government makes it public, there may be some minor changes in the total tax increase on cigarettes.
Are there low taxes on cigarettes in India?
The government's argument behind increasing the excise duty and imposing a new cess on cigarettes and other tobacco products is that the duty on cigarettes in India is much less as compared to other countries. In UK and Australia, there is 80-85 percent tax on cigarettes, whereas in India, the duty on cigarettes is about 53 percent. At the same time, in European countries, there is a tax of 75-80% on cigarettes. According to WHO standard, 75 percent duty on cigarettes is required.
Follow for every important news related to business, market updates and personal finance tips.