Quick Summary
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
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FAQ :
Cigarettes, gutkha, and pan masala will see their GST rate increase from 28% to 40%, making them more expensive. Traditional bidis will experience a price reduction as their GST rate is cut from 28% to 18%.
The reduction in GST on bidis and tendu leaves is intended to safeguard the domestic bidi industry, which employs over 70 lakh workers, many from rural and economically weaker backgrounds. This follows concerns about job losses under the previous tax regime.
The revised GST rates are scheduled to take effect from September 22, 2025. However, tobacco products will continue to be sold at current prices until outstanding compensation cess loan and interest obligations are met.
The decision has sparked debate, with some questioning the implication that cigarettes are harmful but bidis are not. Critics argue bidis can be more harmful due to higher tar and nicotine content, while others sarcastically suggest the move benefits the 'masses'.
Political observers note that the decision comes just months before Assembly elections in Bihar, a state with a significant bidi industry presence.
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