Govt. Hikes Cigarette Excise Duty, Prices Set To Rise From February 1

India has announced a significant increase in excise duties on cigarettes, a move that is expected to raise prices for millions of smokers across the country. According to an order issued by the Ministry of Finance recently, the revised excise duty will range from Rs. 2,050 to Rs. 8,500 rupees per thousand cigarette sticks, depending on the length of the product. The new tax structure will come into effect on February 1.

This policy change is likely to have a widespread impact, as India is home to an estimated 100 million smokers, making it one of the largest tobacco-consuming populations in the world. By increasing taxes on cigarettes, the government aims to curb tobacco consumption while also strengthening public finances.

The excise duty will be levied in addition to the existing goods and services tax (GST), which currently stands at 40% for cigarettes. The finance ministry’s order clarified that the new excise duty will operate alongside the GST framework rather than replacing it. As a result, the overall tax burden on cigarettes is expected to increase further, potentially pushing retail prices higher across all cigarette categories.

In December, the government had approved the Central Excise (Amendment) Bill 2025, which laid the groundwork for this change. The new legislation replaces a temporary levy on cigarettes and other tobacco products with a more permanent excise duty regime. Officials have described the move as part of a broader effort to simplify taxation while ensuring consistent revenue from tobacco products.

At present, total taxes on cigarettes in India account for approximately 53% of their retail price. This figure includes a 28% GST, additional compensation cess, and a value-based levy that varies according to cigarette size. While the tax burden is substantial, it remains well below the World Health Organization’s recommended benchmark of 75% of the retail price. The WHO has long argued that higher tobacco taxes are one of the most effective tools for discouraging smoking, particularly among young people and low-income groups.

Public health experts have welcomed the move but note that further increases may be necessary to significantly reduce smoking rates. Tobacco use remains a major public health challenge in India, contributing to millions of preventable deaths each year through diseases such as cancer, heart disease, and respiratory illnesses.

From an economic perspective, higher cigarette taxes are also expected to boost government revenues, which can potentially be redirected toward healthcare and tobacco control programs.

Dr. Uma Kumar, Head of Rheumatology at AIIMS , Delhi welcomed the measures saying, it is vital that no tobacco product—beedi, cigarette or chewable variant—becomes cheaper or more affordable. People with lower incomes are hit hardest by tobacco-related disease, and they deserve stronger protection. "Ensuring consistent taxation across products, and securing health-focused revenue will help India reduce harm and safeguard future generations."

Overall, the revised excise duty marks a notable step in India’s ongoing efforts to balance public health priorities with fiscal objectives, while aligning its tobacco taxation policies more closely with global standards.