New Excise Duty Hike Targets Tobacco: A Health-Driven Tax Shift

The Indian government has imposed a higher excise duty on cigarettes and tobacco products, effective February 1, to align with global standards and address public health concerns. This marks the first increase in seven years and aims to raise tax incidence from the current 53% closer to WHO's 75% benchmark.

The government has announced an additional excise duty on cigarettes and tobacco products, effective February 1. This move targets longer, premium cigarettes with the steepest increase, as part of a broader strategy to align with global health guidelines and impose a higher tax burden relative to public health impacts.

The Finance Ministry's amendments to the Central Excise Act establish duties ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks based on cigarette length, supplementing a 40% GST. The Health and National Security Cess Act also imposes cess on pan masala businesses, maintaining a total tax incidence of 88%.

This marks a policy shift, as India's cigarette taxes have remained static since GST's introduction in 2017. The hike, approved by Parliament, seeks to increase tax incidence to match benchmarks like the WHO's 75% and bridge the gap with countries like the UK and Australia.

(With inputs from agencies.)