The government has announced February 1 as the date from which additional excise duty will be imposed on tobacco products (cigarettes) and a health cess on pan masala.
Currently, cigarettes are subject to a 28% GST, along with compensation cess at varying rates. Significantly, the tax on cigarettes has remained at the same level for the past seven years since the implementation of GST in July 2017.
The health and national security cess and excise duty on pan masala and tobacco products will be levied on top of the 40% Goods and Services Tax (GST) rate, while for beedis, the 18% GST rate will apply, effective February 1, 2026.
A new MRP-based valuation system has been introduced for tobacco products (chewing tobacco, filter khaini, zarda scented tobacco, gutkha), under which the GST value will be determined based on the retail sale price stated on the package.
Additional excise duty of 91% will be levied on gutkha, 82% on chewing tobacco, and 82% on zarda scented tobacco.
Until now, cigarettes were primarily taxed through GST and a value-based levy.
From February 1, cigarettes will be taxed at a rate of Rs 2,050 - Rs 8,500 per 1,000 sticks, depending on:
- Whether the cigarette is filtered or non-filtered.
- Its length, measured in millimetres (including the length of the filter).
This means that longer cigarettes will be taxed more.
Impact on Cigarette Prices
- The price of short, non-filter cigarettes up to 65 mm will increase by approximately Rs 2.05.
- The price of short, filter cigarettes up to 65 mm will increase by approximately Rs 2.10.
- The price of medium-length cigarettes (65 to 70 mm) will increase by Rs 3.6 to Rs 4.
- The price of long and premium cigarettes 70 to 75 mm will increase by approximately Rs 5.4.
ITC Cigarette Brands: ITC Ltd is the largest cigarette manufacturer in India, with a market share of approximately 70-75%. The company generates over 45% of its revenue from cigarettes.
ITC owns popular cigarette brands such as Insignia, India Kings, Classic, Gold Flake, Wills Navy Cut, Players, Scissors, Capstan, Berkeley, and Bristol.
Godfrey Phillips Cigarette Brands: Godfrey Phillips India is the country's second-largest tobacco and cigarette company. It owns cigarette brands such as Four Square, Red & White, and Cavender's. It also manufactures and distributes the global cigarette brand, Marlboro, in India through an arrangement with Philip Morris.
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