Cigarette prices set to rise as Centre hikes excise duty from February 1
Hyderabad: Cigarette prices will rise from February 1, 2026, after the Centre sharply increased excise duty on cigarettes and other tobacco products.
The Finance Ministry announced the decision on Wednesday, citing rising public health costs and long-standing revenue leakages. The move marks the first major revision since the rollout of the Goods and Services Tax regime in 2017.
The government notified the changes through amendments under the Central Excise Act and the Central Excise (Amendment) Act, 2025.
Under the revised framework, cigarettes will attract additional excise duty ranging from ₹2,050 to ₹8,500 per 1,000 sticks, based on length and category. This levy will apply in addition to GST of up to 40 per cent.
Manufacturers are expected to pass on the higher tax burden. As a result, cigarette prices will increase sharply, especially for longer and filter variants.
Cigarette prices to climb as excise returns alongside GST
The Centre had kept basic excise duty on cigarettes unchanged for nearly seven years. Before GST, excise duties formed a major part of tobacco taxation and saw frequent revisions.
With the latest move, the government has restored excise as a specific levy alongside GST. Earlier, the Supreme Court of India upheld this dual taxation structure.
At the same time, the Centre withdrew the GST Compensation Cess on all tobacco products. It reduced the cess rate to zero and removed the 28 per cent GST slab. Tobacco products will now attract either 18 per cent or 40 per cent GST.
The excise hike will also push up prices of smokeless tobacco. The government introduced a machine-capacity-based levy on chewing tobacco, jarda scented tobacco, and gutkha under the Packing Machines Rules, 2026.
Under this system, authorities will calculate tax based on machine count, speed, output capacity, and retail price. Officials said the move targets tax evasion in mechanised and cash-driven segments.
The Finance Ministry said the revised structure aligns with global public health norms. Officials added that tobacco-related illnesses, especially cancer, place a growing burden on public healthcare.
All changes will take effect from February 1, 2026. Manufacturers and distributors will use the transition period to revise prices, update systems, and adjust production plans.