The Government of India has introduced the Central Excise (Amendment) Bill, 2025 in the Lok Sabha, proposing significant increases in Central Excise duty on tobacco and tobacco-related products. The amendments aim to revise the tariff rates listed under Section IV of the Fourth Schedule of the Central Excise Act, 1944.

The bill, tabled by Finance Minister Nirmala Sitharaman on 28th November 2025, seeks to provide the Centre fiscal room to increase duties on tobacco once GST Compensation Cess on these goods is discontinued.

Why the Amendment Was Needed

After the rollout of GST in July 2017, central excise duty on most tobacco products was reduced to accommodate GST + Compensation Cess without significantly increasing the overall tax burden on consumers.

However, the compensation cess is temporary and will be withdrawn once all pending loans and interest liabilities under the cess fund are cleared. The Centre now intends to restore higher excise duty rates to maintain tax incidence on tobacco products after the cess ends.

Key Provisions: What the Bill Proposes

The bill amends the entire duty structure applicable to:

• Unmanufactured tobacco
• Cigarettes, cigars, cheroots, cigarillos
• Smoking mixtures
• Hookah and gudaku tobacco
• Chewing tobacco, jarda, snuff
• Tobacco extracts and essences
• Nicotine products intended for inhalation or oral/transdermal intake

The Fourth Schedule's tariff table is completely substituted, with several steep duty increases.

Major Highlights of the Proposed Duty Structure

1. Unmanufactured Tobacco

• Duty raised from 64% to 70% across most categories.

2. Cigars, Cheroots & Cigarillos

• Duty increased to 25% or ₹5,000 per 1,000 sticks, whichever is higher(up from 12.5% or ₹4,006 per 1,000).

3. Cigarettes

A substantial hike across lengths:

• Non-filter cigarettes (≤65 mm):Up to ₹2,700 per 1,000 sticks (previously ₹200 per 1,000)
• Non-filter (65-70 mm):₹4,500 per 1,000 (previously ₹250 per 1,000)
• Filter cigarettes up to 65 mm:₹3,000 per 1,000 (previously ₹440)
• Filter cigarettes 65-70 mm:₹5,200 per 1,000 (previously ₹440)
• Filter cigarettes 70-75 mm:₹7,000 per 1,000 (previously ₹545)
• Other cigarettes:₹11,000 per 1,000 sticks

This marks one of the biggest excise duty hikes on cigarettes in recent years.

4. Hookah & Water-Pipe Tobacco

• Duty increased to 40% (earlier 25-60%).

5. Smoking Mixtures

• Duty on pipe/cigarette smoking mixtures raised to 325% (earlier 60%).

This is one of the steepest hikes in the entire tariff table.

6. Chewing Tobacco, Jarda & Snuff

• Many items now taxed at 100% duty.

7. Nicotine & Non-Combustion Products

Products under heading 2404 (nicotine pouches, inhalation devices, etc.) now attract 100% excise duty, signalling tighter control over new-age nicotine products.

Impact Analysis

What it Means for Consumers

• Prices of cigarettes, cigars, chewing tobacco, and hookah products are expected to rise sharply.
• New-age nicotine products may become significantly costlier due to the 100% duty slab.

Impact on Public Health

• The government's rationale signals a strong public-health orientation, with higher taxes reducing consumption.

Impact on Industry

• Manufacturers may face an immediate cost surge.
• The bidi industry sees smaller hikes compared to cigarettes.

Fiscal Impact

• The Financial Memorandum clarifies no additional government expenditure, the amendment is revenue-positive.

Statement of Objects & Reasons: What the Government Says

The amendment seeks to:

• Restore fiscal space once the GST compensation cess ends.
• Ensure stable tax incidence on tobacco products.
• Update tariff rates that had been reduced post-GST rollout.

The bill aims to protect revenue and public health by discouraging tobacco consumption.

Conclusion

The Central Excise (Amendment) Bill, 2025 represents a major policy shift in India's tobacco taxation framework. With steep hikes across cigarettes, chewing tobacco, smoking mixtures, and nicotine-based products, the government has positioned excise duty as both a revenue measure and a public-health deterrent.

Official copy of the notification has been attached