Overview
- The Finance Ministry notified a specific excise on cigarettes of ₹2,050–₹8,500 per 1,000 sticks based on length, effective February 1, charged in addition to up to 40% GST.
- GST on cigarettes, pan masala and most tobacco products moves to 40% while bidis are set at 18%, with the GST compensation cess ending and a Health & National Security Cess applied to pan masala.
- Shares of cigarette makers slumped after the announcement, with ITC logging its steepest drop since 2020 and Godfrey Phillips falling about 17%, as analysts flagged earnings and volume risks.
- Brokerage estimates point to significant price hikes for many segments—often 20–30%—with some longer sticks seen rising by ₹2–₹3 per cigarette as companies pass through higher taxes.
- New capacity-based excise rules for chewing tobacco, jarda and gutkha require monthly duty tied to packing machine counts and CCTV coverage with 24-month footage retention, aiming to curb evasion, while industry groups warn of heightened illicit trade.