Winning Bizness Desk
Mumbai.India’s smokers are likely to feel a sharp pinch as Parliament clears the Central Excise (Amendment) Bill, 2025, paving the way for steep increases in excise duties on cigarettes and other tobacco products. The legislation amends the Central Excise Act, 1944, giving the Union government expanded powers to revise and raise tobacco taxes. While the government has not officially announced new retail prices, industry experts say the hike in duties will inevitably translate into costlier cigarettes, cigars and other tobacco products, with the stated objective of discouraging consumption and improving public health outcomes.
Steep duty hikes across cigarette categories
The most significant impact of the new law will be seen in cigarette taxation, where duties are set to jump several times over existing rates. Excise duties, which earlier ranged between ₹200 and ₹735 per 1,000 sticks, will now move into a much higher band of ₹2,700 to ₹11,000 per 1,000 sticks, depending on cigarette length and type. Smaller filter cigarettes up to 65 mm will see duties rise from ₹440 to ₹3,000 per 1,000 sticks, marking an increase of over 580 percent. Premium cigarettes measuring between 70 and 75 mm will face an even sharper rise, with duties moving from ₹545 to ₹7,000 per 1,000 sticks, an increase of more than 1,100 percent.
Other tobacco products also face higher taxes
The revised excise framework goes beyond cigarettes and brings almost all tobacco products under a tighter tax net. The government has proposed substantial increases across multiple categories, signalling a broader push against tobacco use.
Key changes under the new excise law include:
- Chewing tobacco duty rising from 25 percent to 100 percent
- Hookah tobacco duty increasing from 25 percent to 40 percent
- Raw tobacco varieties, including flue-cured Virginia, sun-cured and burley, moving from 64 percent to 70 percent
- Jarda scented tobacco continuing at a high 100 percent levy
- Cut tobacco shifting from a per-kilogram duty structure to a flat 10 percent tax
These changes are expected to push up manufacturing costs, which companies are likely to pass on to consumers.
Government assurances on farmers and workers
Addressing concerns in Parliament, Finance Minister Nirmala Sitharaman said the move was not intended to hurt tobacco farmers or beedi workers. She assured that additional revenue from the duty hike would be shared with states as per Finance Commission recommendations. The government, she said, is promoting crop diversification and alternative livelihoods to help farmers gradually move away from tobacco cultivation. “The intent is not to make cigarettes affordable but to discourage consumption,” she said while defending the Bill.
Public health goals behind higher taxes
The government has positioned the excise hike as both a fiscal and a public health measure. Tobacco use remains one of India’s biggest health challenges, contributing to nearly 1.35 million deaths every year, as per World Health Organization estimates. Global health agencies have long argued that higher taxes are among the most effective tools to reduce tobacco consumption, especially among young and low-income users.
What it means for prices and consumers
At present, total taxes account for around 53 percent of the retail price of cigarettes in India, well below the WHO-recommended level of 75 percent. With the new excise duties and the existing 40 percent GST, cigarette prices are expected to rise sharply. Analysts believe manufacturers will revise prices soon to absorb higher tax burdens, making smoking a more expensive habit and aligning India closer to global public health standards.
