Cigarettes
Credit: Reuters File Photo
New Delhi: The prices of tobacco products like cigarettes and gutkha are set to rise sharply from next month, with the Centre on Thursday notifying imposition of additional excise duty on these products over and above the 40% GST.
A cigarette currently priced at Rs 18 per stick is expected to cost around Rs 21-22 after the new excise duty takes effect. This reflects an increase of nearly 15-20%, depending on how companies pass on the tax burden to consumers.
The Union Finance Ministry has notified fresh excise duties under the Central Excise Act and the Central Excise (Amendment) Act, 2025.
Under the new regime, cigarettes will attract additional excise duties ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on their length and whether they are filtered. The new rates will be applicable from February 1.
These taxes will be levied over and above 40% GST on these products.
Share prices of tobacco companies fell sharply after the government’s notification.
ITC tumbled 9.69% to Rs 363.95 at the BSE. It hit a 52-week low of Rs 362.70 in the intra-day trade.
“ITC is set to face near-term margin and volume pressures following the government’s notification of a new excise duty on cigarettes,” Religare Broking said in a note.
However, the brokerage underlined that “ITC’s strong pricing power and diversified business model should support medium-to-long-term earnings resilience”.
According to an explanatory note issued by the Finance Ministry, the move to impose higher taxes are aimed at preventing cigarettes from becoming more affordable at a time when the economic burden of tobacco-related diseases is projected to exceed Rs 2.4 lakh crore annually, as per the Ministry of Health and WHO estimates.
It is “consistent with India’s long-standing policy that tobacco should be taxed heavily relative to other goods, especially given its adverse health externalities and addictive nature,” it said.
Pricey Puff
* A cigarette currently priced Rs 18 per stick would cost Rs 21-22 after the new excise duty kicks in
* The taxes will be levied over and above 40% GST on the tobacco products