This duty will be levied in addition to the existing 40 percent Goods and Services Tax (GST) on tobacco products.

Tobacco Prices Soar: Govt Hikes Excise Duty on Cigarettes & Pan Masala from Feb 1

The Government of India has raised excise duty on tobacco products, including cigarettes, with effect from February 1, 2026. This move is expected to make smoking significantly more expensive for millions of consumers nationwide.

On Wednesday, the Finance Ministry notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, imposing excise duty ranging from INR 2,050 to INR 8,500 per 1,000 cigarette sticks depending on length. This duty will be levied in addition to the existing 40 percent Goods and Services Tax (GST) on tobacco products.

The revised duty replaces the earlier compensation cess, which has been abolished as part of the government’s broader move to rationalise the GST regime. From February 1, tobacco products including pan masala and cigarettes will continue to attract 40 percent GST, while bidis (rolled tobacco leaves) will be taxed at 18 percent GST. Moreover, a Health and National Security Cess will be levied on pan masala, and additional excise duty will apply to tobacco and related products.

The Parliament in December approved two bills enabling the new Health and National Security Cess and excise duty on tobacco products, and the government has now formally set February 1, 2026 as the implementation date.

The announcement triggered an immediate market reaction, with shares of major cigarette makers such as ITC and Godfrey Phillips India falling sharply, reflecting investor concern over potential cost pressures and sales impact.

Source: Hindustan Times