February 1: Cigarettes and other tobacco products are subject to an excise tax in India as
February 1: Beginning on , 2026, the government increased the excise tax on tobacco goods, increasing the cost of cigarettes for an estimated 10 crore smokers in the most populated nation in the world.
The Chewing Tobacco, Jarda Scented Tobacco, and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026 were announced late on Wednesday by the Finance Ministry. With effect from February 1st, that levied an excise levy of ₹2,050–8,500 per 1,000 sticks, depending on the length of the cigarette.
Following the government’s imposition of a cigarette tax on top of the 40% GST, the stocks of India’s biggest cigarette manufacturers, ITC and Godfrey Philips, dropped as much as 8%.
Godfrey Phillips India, the distributor of Marlboro cigarettes in India, decreased 4.1%, while ITC, the market leader and manufacturer of Gold Flake and Classic cigarettes, lost 2%. ITC led falls on the FMCG index, which was trading 0.6% down, and was the most loser on the Nifty 50 index.
India’s cigarette tax
In addition to the 40% GST rate, there is an excise tax on tobacco items, such as cigarettes and pan masala. It takes the place of the compensating cess, which was eliminated as part of a larger effort to rationalize the tax on goods and services in the fourth-largest economy in the world.
Bidis (rolled tobacco leaves) will be subject to 18% GST starting on February 1st, while tobacco goods, such as cigarettes and pan masala, would be subject to 40% GST. Additionally, tobacco and associated items would be subject to increased excise tax, and pan masala will be subject to a Health and National Security Cess.
In December, the Parliament passed two legislation authorizing the imposition of an excise tax on tobacco and a new Health and National Security Cess on the production of pan masala.
The administration announced on Wednesday that these charges would go into effect on February 1, 2026. That day will mark the end of the present GST compensation cess, which is now imposed at various rates.