The Central Government has notified significant changes in the Goods and Services Tax (GST) rate structure for tobacco and tobacco-related products, including pan masala, cigarettes and biris. The amendments were issued through multiple notifications on December 31, 2025, following the recommendations of the GST Council and will come into effect from February 1, 2026.
As per Notification No. 19/2025 - Central Tax (Rate), biris classified under tariff items 2403 19 21 and 2403 19 29 have been newly inserted in Schedule II, attracting 9% Central GST. Correspondingly, similar amendments have been notified under Integrated GST (IGST) and Union Territory GST to maintain rate parity across tax laws.
Further, the government has expanded Schedule III, which attracts higher GST rates. Items such as pan masala, unmanufactured tobacco, cigars, cigarettes, manufactured tobacco products, and products containing tobacco or nicotine intended for inhalation without combustion have been inserted into the higher tax slabs. Under the Central GST framework, these goods will attract 20% CGST, while under IGST, the rate has been aligned at 40%, indicating a clear move towards higher taxation of tobacco-related products.
One of the most notable changes is the omission of Schedule VII, which earlier prescribed a 14% GST rate under Central GST and 28% under IGST. With the deletion of this schedule, goods previously covered under these slabs are now realigned under other higher-rate schedules, effectively increasing the tax burden on the concerned products.
Similar amendments have also been carried out under the Union Territory GST notifications to ensure uniform implementation across all jurisdictions. The government stated that the changes are being made in public interest and are part of ongoing GST rate rationalisation efforts targeting demerit goods such as tobacco and pan masala.
Tax experts believe that the revised GST structure will have a direct impact on pricing, compliance obligations, and revenue collections from the tobacco sector, while also aligning with public health objectives discouraging consumption of such products.
Official copy of the notification has been attached
CAclubindia
