Excise Duty on Tobacco Products: This news can prove to be a big shock for those who smoke cigarettes and eat pan masala. The central government has decided to impose excise duty on cigarettes from February 1, 2026. An official order in this regard has been issued by the government on Wednesday night. Earlier in December 2025, the government had approved the Central Excise (Amendment) Bill, 2020, under which the way was paved for tightening the tax regime on tobacco products.

Heavy tax on tobacco products

Under the new system, excise duty on cigarettes will be decided on the basis of its length. This duty will be in the range of Rs 2,050 to Rs 8,500 per thousand sticks. That means, the longer the cigarette, the more tax will have to be paid on it. After this decision, the increase in cigarette prices is considered certain, which will have a direct impact on the pockets of consumers. The aim of the government is not only to increase revenue but also to discourage the consumption of tobacco products and take strict action regarding public health.

According to the notification, the new taxes (levies) to be imposed on tobacco and pan masala will be in addition to the applicable GST rates. These new provisions will replace the existing GST Compensation Cess, which is currently levied on ‘sin products’ at different rates. From February 1, pan masala, cigarettes, tobacco and other related products will be taxed at 40 percent under GST, while 18 percent GST will be imposed on beedis.

Government issued notification

Apart from this, along with GST, Health and National Security Cess will also be imposed on Pan Masala. At the same time, as per the notification of the Finance Ministry, additional excise duty will also be collected on tobacco and tobacco related products. After these changes, the total tax burden on tobacco products is expected to increase, which may lead to an increase in the prices of these products.

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GST 2.0: After the announcement of GST 2.0, the government has increased the tax on harmful goods like cigarette, paan masala and tobacco products to 40 percent on the one hand, while there is no effect on alcohol. This decision clearly shows that despite the long -standing negotiations between the Central and the State Governments, the right to tax the liquor will remain with the states.

Rates will increase on harmful things

The government has increased the tax on the products such as cigarettes, gutkha and other tobacco products from 28 percent to 40 percent. That is, an additional burden of 12 percent has been put on these items directly. Its purpose is to reduce the consumption of these harmful things among the people on the one hand, on the other hand the government is also considering it as a big source of revenue.

The FAQ issued by the Press Information Bureau (PIB) states that this special rate will apply only to some goods like harmful and luxury items. In fact, till now these items were also applied with 28 percent GST, but after merging the cess into GST, they have been kept under a special rate.

Big means of earning alcohol for states

At the same time, alcohol is completely excluded from the purview of GST 2.0. Earnings from alcohol for states are a large part of their total tax revenue, which reaches 15 to 25 percent in many states. This is the reason that if liquor was included in GST, then the income of the state governments would have a direct impact. Tax experts believe that the revenue from alcohol is very important for the development work and other expenses of the states.

Therefore, despite the implementation of GST 2.0, liquor rates will remain under the control of the states and the state governments will continue to fix tax on it. This simply means that while tobacco and related products will be expensive, alcohol will not be affected at the moment.

Also read: What do the big business personalities of the country think on GST 2.0? Opinion from Anand Mahindra to Harsh Goenka