Government Initiates New Excise Duty and Health Cess on Tobacco and Pan Masala

From February 1, a new excise duty on tobacco products and a health cess on pan masala will be imposed. These levies, over existing GST rates, will replace the current compensation cess. Cigarettes and similar products will face a 40% GST, while biris will have an 18% GST rate.

In a significant move, the government announced the implementation of a new excise duty on tobacco products and a health cess on pan masala, effective February 1. These additional levies will be imposed on top of the existing GST rates, replacing the compensation cess currently levied on these sin goods.

As per the latest government notification, from February 1, all pan masala, cigarettes, tobacco, and related products will attract a GST rate of 40% while 'biris' will see an 18% GST rate. Additionally, pan masala will face a Health and National Security Cess, and tobacco products will incur an additional excise duty.

Furthermore, the Finance Ministry has introduced the Chewing Tobacco, Jarda Scented Tobacco, and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026. Parliament had previously approved two Bills to enable the new levy implementations. With these changes, the GST compensation cess will be scrapped starting February 1.

(With inputs from agencies.)