New Delhi, Jan 1: The government has imposed additional excise duty on tobacco products effective February 1, 2026, making cigarettes costlier for an estimated 10 crore smokers across the country.
Late on Wednesday, the Finance Ministry notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, levying excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, depending on their length. The duty will be charged over and above the existing 40 per cent Goods and Services Tax (GST).
Following the announcement, shares of major cigarette manufacturers fell sharply. ITC, the maker of Gold Flake and Classic and the market leader, slipped 2 per cent, while Godfrey Phillips India, distributor of Marlboro cigarettes, dropped 4.1 per cent. ITC emerged as the biggest loser on the Nifty 50 index and also led declines in the FMCG index, which was trading 0.6 per cent lower.
Under the revised tax structure, tobacco products including pan masala and cigarettes will continue to attract 40 per cent GST, while bidis will be taxed at 18 per cent GST. In addition, a Health and National Security Cess will be levied on pan masala, and tobacco and related products will face the new excise duty.
The excise duty replaces the GST compensation cess, which will be abolished as part of the government’s move to rationalise the tax regime. Parliament had approved the enabling bills for the new cess and excise duty in December.
The government has notified February 1, 2026, as the date from which the new levies will come into force, coinciding with the withdrawal of the existing compensation cess. (Agencies)
