Lok Sabha to Take Up Central Excise Amendment Bill 2025 for Passage, Proposing Steep Duty Hikes on Tobacco

The Lok Sabha is set to consider and pass the Central Excise (Amendment) Bill, 2025, which seeks to replace the existing GST compensation cess on tobacco products with revised excise duties. Introduced on December 1, the bill aims to amend the Central Excise Act, 1944, governing duties on goods manufactured in India.

Since the introduction of the Goods and Services Tax (GST) in 2017, most central excise duties have been repealed except for select items like tobacco and tobacco products. To compensate states for revenue losses due to GST, a GST compensation cess was levied on these products, resulting in a combined tax burden of GST, compensation cess, and excise duty.

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The proposed legislation plans to discontinue the compensation cess once liabilities are cleared and increase central excise duties to maintain the existing tax incidence on tobacco goods. Finance Minister Nirmala Sitharaman explained that the bill provides “fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence.”

The amendment includes significant hikes, such as raising the duty on unmanufactured tobacco from 64 per cent to 70 per cent, and increasing excise duty on cigarettes from a range of Rs 200-735 per thousand sticks to Rs 2,700-11,000. Other tobacco products like chewing tobacco, hookah, and smoking mixtures will also see substantial duty increases.

This bill represents a key step in balancing fiscal requirements with public health goals by discouraging tobacco consumption through higher taxes while safeguarding state revenues. It aligns with ongoing efforts to streamline indirect taxes and update regulations governing tobacco products in India.