New Tax Shock: Modi Government Plans Major Excise Hike and New Cess on Cigarettes, Tobacco and Pan Masala
The Centre is preparing to introduce two new bills that could massively increase excise duty on cigarettes, smoking mixtures and pan masala—ensuring high taxation continues even after the GST Compensation Cess ends.
New Tax Shock:
on tobacco and tobacco-based products, including cigarettes, pipe tobacco and smoking mixtures. The move comes as part of two new bills the Modi government plans to introduce in the Lok Sabha on 1 December 2025.
According to a Financial Express report, the government intends to revise central excise duty so that high taxes on these harmful products remain intact even after the GST Compensation Cess is eventually discontinued.
Two New Bills to Be Introduced
1️⃣ Central Excise (Amendment) Bill, 2025
2️⃣ Health & National Security Cess Bill, 2025
The new Health and National Security Cess aims to tax all forms of cigarette and pan masala production—whether handmade, machine-made or hybrid—ensuring tighter regulation for public health as well as national security.
🚬 Cigarettes Likely to Become Much More Expensive
Under the proposed amendments:
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Filter cigarettes (over 75mm):
Current duty — ₹735 per 1,000 sticks
Proposed duty — ₹11,000 per 1,000 sticks -
Non-filter cigarettes (65–70mm):
Current duty — ₹250 per 1,000 sticks
Proposed duty — ₹4,500 per 1,000 sticks -
Smoking mixture used in pipes/rolls:
Duty increase from 60% to 320%
This represents one of the steepest tax hikes ever proposed on tobacco products.
Why is the Government Doing This?
When GST was introduced in 2017, taxes on tobacco were kept modest because they were combined with a separate compensation cess. With that cess now scheduled to end soon, the government wants to ensure:
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Revenue does not drop
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Tobacco consumption remains discouraged
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Health and security objectives are strengthened
The move is expected to significantly increase retail prices of cigarettes, pan masala and related products.
