Government Implements Steep Hike in Tobacco Excise Duties

The Central Excise (Amendment) Act, 2025, introduces significant increases in excise duties on tobacco products, including cigarettes, cigars, and hookah tobacco. The law aims to reduce tobacco consumption and align with WHO tax benchmarks. Measures are in place to support tobacco farmers and beedi workers during this transition.

The Government has enacted the Central Excise (Amendment) Act, 2025, implementing a notable increase in excise duties on various tobacco products. The revised law significantly raises the excise duty on cigarettes, now ranging from 2,700 rupees to 11,000 rupees per thousand sticks, compared to the previous 200 to 735 rupees.

The amendment affects a broad array of products including cigarettes, cigars, and hookah tobacco, granting the government fiscal room to adjust excise duties beyond the cessation of the tobacco cess. Notably, duties on chewing and hookah tobacco are set to rise sharply, targeting consumption reductions in line with public health objectives.

Finance Minister Nirmala Sitharaman highlighted the Act's role in aligning India's tax rate on cigarettes with WHO standards, aiming for a total tax incidence closer to 75% of the retail price. Assurances were given that tobacco farmers and beedi workers will receive support through crop diversification and welfare programs, ensuring minimal adverse impacts.

(With inputs from agencies.)