India will impose an additional excise duty on tobacco products, including cigarettes, from February 1, 2026, making them more expensive for nearly 10 crore smokers.
The finance ministry late on Wednesday notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026. Under these rules, cigarettes will attract an excise duty ranging from ₹2,050 to ₹8,500 per 1,000 sticks, depending on their length, effective February 1.
Following the announcement, shares of major cigarette makers declined sharply. ITC and Godfrey Phillips India fell by up to 8%, as the new excise duty comes in addition to the existing 40% GST. ITC, the market leader and maker of Gold Flake and Classic, slipped 2%, while Godfrey Phillips India, which distributes Marlboro in India, dropped 4.1%. ITC was the top loser on the Nifty 50 and also led losses in the FMCG index, which was down 0.6%.
The new excise duty on tobacco products, including pan masala and cigarettes, will be levied over and above the 40% GST rate. This replaces the GST compensation cess, which has been abolished as part of the government’s move to rationalise the tax structure.
From February 1, tobacco products such as pan masala and cigarettes will continue to attract 40% GST, while bidis will be taxed at 18%. In addition, a Health and National Security Cess will be imposed on pan masala, and tobacco and related products will face the new excise duty.
Parliament had approved two bills in December enabling the levy of the Health and National Security Cess on pan masala manufacturing and the imposition of excise duty on tobacco. The government has now notified February 1, 2026, as the date these changes will come into effect, with the existing GST compensation cess ending on the same day.