Overview
- The Finance Ministry has notified an excise duty of Rs 2,050–8,500 per 1,000 cigarette sticks, to be charged on top of 40% GST from February 1, 2026.
- The measure shifts tobacco from the GST compensation cess to an excise regime and is estimated to lift the overall tax burden to roughly 60–70% from about 50–55%.
- Experts caution that steep taxes could push smokers toward cheaper or illegal products, with illicit tobacco already about 26% of India’s market.
- JPMorgan flags downtrading risk in the King Size Filter segment, while Nomura and Jefferies note the Tobacco Institute of India’s request for a policy review.
- Analysts point to Australia’s 2012–2020 hikes, when illicit tobacco reportedly rose from under 2% to around 14% of the market.