India has imposed a fresh excise duty on cigarettes, ranging between ₹2,050 and ₹8,500 per thousand sticks depending on the length of the product, according to an order issued by the Ministry of Finance late on Wednesday. The revised duty structure will come into effect from February 1, marking a significant change in the country’s tobacco taxation framework.
The move is expected to push up cigarette prices and could impact nearly 100 million smokers across the world’s most populous nation. The new excise duty will be levied in addition to the existing 40% goods and services tax (GST) on cigarettes, further increasing the overall tax burden on tobacco products.
In December, the government approved the Central Excise (Amendment) Bill, 2025, which replaces a temporary levy on cigarettes and other tobacco products with a permanent excise duty mechanism. The latest order operationalises this legislation, bringing cigarettes back under the central excise regime alongside GST.
Despite the increase, total taxes on cigarettes in India currently account for about 53% of retail prices, which remains significantly below the World Health Organization’s recommended benchmark of 75% aimed at discouraging tobacco consumption. At present, cigarette taxation includes a 28% GST, a compensation cess linked to cigarette size, and now the newly imposed excise duty.
The higher levies are likely to have implications for cigarette manufacturers, including major players such as ITC Ltd and Godfrey Phillips India, potentially affecting volumes and pricing strategies. Industry analysts expect companies to pass on at least part of the additional tax burden to consumers, which could weigh on demand in the short term.
The government, however, has consistently maintained that higher tobacco taxation is a key public health measure, intended to curb consumption and reduce the long-term health and economic costs associated with smoking.
