India Overhauls Tobacco Taxes with Higher Duties

The Indian government has announced a comprehensive overhaul of taxation on tobacco products, effective February 1, 2026, introducing higher excise duties on cigarettes and smokeless tobacco while restructuring goods and services tax rates and eliminating the compensation cess. The changes, notified by the finance ministry on December 31, 2025, aim to address rising public health costs associated with tobacco use and strengthen revenue collection in a sector plagued by evasion.

Under the revised framework, cigarettes will face additional excise duties ranging from 2,050 rupees to 8,500 rupees per 1,000 sticks, depending on their length and filter status. Shorter cigarettes, up to 65 millimeters, will incur duties of approximately 2,700 to 3,000 rupees per 1,000 sticks. Duties increase for longer variants: those between 65 and 70 millimeters enter a higher bracket, while cigarettes exceeding 70 millimeters but not surpassing 75 millimeters will attract around 7,000 rupees per 1,000 sticks. Products in an "other" category, often longer or specially designed, face the highest levy of up to 11,000 rupees per 1,000 sticks. These excises will apply alongside a goods and services tax...