Newz Desk, Durgapur: Smokers and pan masala consumers are likely to face a steep price shock soon, with the Centre introducing two new bills in the Lok Sabha on the first day of the Winter Session. Finance Minister Nirmala Sitharaman on Monday tabled the Central Excise (Amendment) Bill, 2025 and the Health Security and National Security Cess Bill, 2025, both aimed at overhauling the taxation structure on tobacco and tobacco-based products.
Experts believe the new taxation framework could result in cigarette and pan masala prices rising up to double their current retail value. The significant price hike stems from the government’s move to replace the existing GST compensation cess with new forms of excise duties and levies on “sin goods”—products known to be harmful to health.
Smoke Gets Costlier: New Bills Push Cigarette Duty Up by 1,000%+
Massive Hike in Excise Duty Proposed
The new bills propose two layers of excise duty on tobacco products. As per the draft, excise duty on cigarettes of different lengths will see unprecedented hikes:
- 65 mm filter cigarettes: Duty to rise from ₹440 per 1,000 sticks to ₹3,000 — a 582% increase.
- 65–70 mm cigarettes: Duty to jump from ₹440 to ₹5,200 per 1,000 sticks.
- 70–75 mm filter cigarettes: Duty to climb from ₹545 to ₹7,500 per 1,000 sticks — an 1,184% increase.
The government has also proposed a 25% excise duty on cigars, cheroots, khaini, and zarda. Raw tobacco will attract a 60–70% levy, while nicotine-based smoking products may face a tax as high as 100%.
For pan masala, taxation will be based on machine capacity and production volume, aiming to tighten regulation on the industry.
End of GST Compensation Cess Structure
Currently, cigarettes and other tobacco products attract 40% GST along with a GST compensation cess, a mechanism that was originally introduced to support states post-GST rollout. Though the cess officially expired on June 30, 2022, its tenure was extended till March 31, 2023, due to the large loans taken by states during the COVID-19 pandemic.
The GST Council had already hinted in its September meeting that the compensation cess on tobacco products would be gradually phased out. The introduction of the two new bills marks the formal beginning of that transition.
Political and Legislative Developments
Copies of the bills were circulated to MPs on Sunday, following earlier discussions in the Business Advisory Committees of both Houses. The bills were then formally tabled by the Finance Minister in the Lok Sabha on Monday.
If passed, the new legislation is expected to fundamentally reshape the taxation regime for the tobacco sector and significantly increase market prices — potentially turning a single cigarette into a luxury item, with one packet’s cost equalling that of half a pack today.
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