The latest Goods and Services Tax (GST) reforms announced by the GST Council have created a sharp contrast in the taxation of tobacco products. While cigarettes, gutkha and pan masala are set to become more expensive with the GST rate rising from 28% to 40%, the traditional bidi will see a price drop as its tax rate has been cut from 28% to 18%.
In addition, the GST on tendu leaves, the key raw material used in making bidis, has been slashed from 18% to 5%, giving further relief to the sector.
Why the Relief for Bidis?
The government's move is seen as an attempt to safeguard the domestic bidi industry, which employs over 70 lakh workers across India. Many of these workers belong to rural and economically weaker communities. Several social organisations, including the Swadeshi Jagran Manch, had urged the Finance Ministry to lower GST on bidis, citing heavy job losses and hardships in both registered and unregistered units under the previous 28% tax regime.
Public Reaction
The decision, however, has sparked debate on social media, with many questioning whether the government is implying that cigarettes are harmful but bidis are not. Critics point out that bidis, often consumed by the underprivileged, are more harmful than cigarettes due to higher tar and nicotine content. Some users have sarcastically said that the move shows the Centre is "working for the masses."
Political observers note that the decision comes just months before the Assembly elections in Bihar, a state with a significant bidi industry presence.
Implementation Timeline
The revised GST rates will come into effect from September 22, 2025. However, the government has clarified that tobacco products will continue to be sold at current prices until the compensation cess loan and interest obligations are cleared.
Industry experts say while the higher tax on cigarettes and gutkha may help curb consumption and boost revenue, the tax cut on bidis is primarily aimed at protecting livelihoods, keeping the government caught between public health concerns and employment priorities.
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