The central government has tightened the tax screw on cigarettes, a move that is likely to make smoking costlier for millions of users and hit the sales of tobacco companies.
In an order issued late on Wednesday, the finance ministry said it has imposed a fresh excise duty on cigarettes, effective February 1. The duty will range from ₹2,050 to ₹8,500 per 1,000 sticks, depending on the length of the cigarette.
The new levy is expected to push up cigarette prices for nearly ten crore smokers in India, the world’s most populous country.
This excise duty will be charged over and above the goods and services tax (GST). Cigarettes already attract a 40 percent GST, according to the government order.
In December, Parliament approved the Central Excise (Amendment) Bill, 2025, which replaces a temporary levy on cigarettes and other tobacco products with a permanent legal framework. The latest order gives effect to that change.
Despite the fresh duty, total taxes on cigarettes in India still account for only about 53 percent of the retail price. This is well below the World Health Organization’s recommended level of 75 percent, which is aimed at discouraging tobacco consumption. The current tax structure includes a 28 percent GST and an additional levy linked to the size of the cigarette.
The higher taxes could weigh on cigarette makers such as ITC and Godfrey Phillips India, as higher prices may slow demand in a price-sensitive market.
