India imposes new cigarette excise duty from February 1
India has moved to tighten its grip on cigarette taxation, announcing a new excise duty that will come into effect from February 1, a decision likely to be felt by smokers, manufacturers, and the broader tobacco market alike.
According to an order issued late Wednesday by the finance ministry, the excise duty on cigarettes will range from 2,050 rupees to 8,500 rupees per thousand sticks, depending on the length of the cigarette. The measure applies nationwide and is expected to push up retail prices for an estimated 100 million smokers in the world’s most populous country.
The move follows the government’s approval in December of the Central Excise (Amendment) Bill 2025, which replaces a temporary levy on cigarettes and other tobacco products with a more permanent framework. Officials say the change is aimed at simplifying taxation while strengthening the government’s ability to regulate tobacco consumption through pricing.
Under the new structure, the excise duty will be charged in addition to the existing goods and services tax (GST). Cigarettes currently attract a 28% GST, along with an additional levy based on the size of the product. When combined with the new excise duty, total taxes on cigarettes in India amount to roughly 53% of retail prices.
That figure remains significantly below the World Health Organization’s recommended benchmark of 75%, a level the global health body says is more effective in discouraging smoking. Public health advocates have long argued that India’s relatively lower tax burden on cigarettes has limited the impact of pricing as a deterrent, especially among younger and lower-income smokers.
For consumers, the immediate effect is likely to be higher prices at the counter. While the exact increase will vary by brand and cigarette length, industry analysts expect manufacturers to pass on at least part of the additional tax to buyers. For many smokers, particularly in urban areas where cigarette use is more common, the price rise could prompt a rethink of habits or a shift to cheaper alternatives.
The decision also has implications for major tobacco companies operating in India. Firms such as ITC and Godfrey Phillips India, which dominate the legal cigarette market, could see pressure on sales volumes in the short term. However, analysts note that large manufacturers have historically managed to absorb or offset tax hikes through pricing strategies and cost controls.
At the same time, there are concerns that higher taxes could push some consumers toward illicit or unregulated tobacco products, a persistent challenge in India’s vast and diverse market. Authorities have repeatedly said enforcement will be key to ensuring tax increases do not unintentionally boost illegal trade.
For the government, the new excise duty represents a balancing act between public health goals and revenue considerations. Tobacco taxes remain an important source of income, even as policymakers seek to reduce consumption. As the February 1 implementation date approaches, both consumers and industry players are preparing for a change that underscores India’s ongoing effort to reshape its tobacco tax regime.