The Ministry of Finance imposed an additional excise duty on cigarettes and other tobacco products, effective February 1, 2026.
Cigarettes, tobacco to be costlier from Feb 1 as Centre imposes additional excise duty (File Photo: IANS)
The Central government on Wednesday notified a significant revision in excise duty on cigarettes and other tobacco products. According to the notification issued by the Ministry of Finance, an additional excise duty will be imposed on cigarettes in the range of Rs 2,050 to Rs 8,500 per 1,000 sticks, effective February 1, 2026.
The additional duty will be levied over and above the existing 40 per cent Goods and Services Tax (GST) on tobacco and similar products.
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The move follows Parliament’s recent passage of the Central Excise (Amendment) Bill, 2025, which provides for an increase in excise duties on tobacco and allied products following the expiry of the GST compensation cess.
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Finance Minister Nirmala Sitharaman had said in Parliament that the revenue collected will become a part of the divisible pool, and will be redistributed again to the States at the 41 per cent devolution formula.
“Many members here made the comment that this is a cess. Excise is not a cess. Excise duty existed before GST. Compensation cess is reverting back to the Centre to be collected as excise duty, which will be redistributed to the States at the 41 per cent allocated,” she had said.
Several countries revise tobacco taxes annually, while many link it with inflation, she noted. The minister added that even in India, tobacco taxes were increased regularly prior to the introduction of GST, primarily due to health considerations. “Higher prices or taxes were intended to act as a deterrent so that people would not get into the habit,” Sitharaman said.
The government is bringing back the excise duty which existed priority to the GST system.
The minister said because of various initiatives taken by the government, acreage under tobacco cultivation of over 1.12 lakh acres (45,323 hectare) moved to other crops between 2018 to 2021-22. It has shifted to sugarcane, groundnut, oil palm, cotton, chilli, maize, onion, pulses, and turmeric, she had said.
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