The Lok Sabha on Wednesday approved the Central Excise (Amendment) Bill, 2025, which aims to raise excise duty on tobacco products. The bill will take effect once the GST compensation cess ends. The government currently charges 28% GST and different cess rates on cigarettes, bidis, hookah tobacco, zarda, and chewing tobacco.
Under the new structure, raw tobacco will face 60–70% excise duty. Cigarettes and bidis will carry a 25% duty, or ₹5,000 for every 1,000 bidis. The duty on cigarettes will range between ₹2,700 and ₹11,000 per 1,000 sticks, depending on length and filters. Chewing tobacco will attract ₹100 per kilogram.
Finance Minister Explains the Tax Structure
Finance Minister Nirmala Sitharaman explained that the compensation cess will end soon because the COVID-related loans will be fully repaid in the next two weeks. Once the cess ends, the Centre plans to restore its earlier excise tax system. She said the Centre will share 41% of this revenue with the states.
She also stressed that the new charge is still a cess, not an additional tax. The Centre will not keep the entire collection. “Excise duty existed before GST. Even after the cess ends, demerit goods like tobacco must carry higher taxes. Without excise duty, the tax on tobacco will drop, and the bill prevents that,” she said.
MPs Raise Concerns About Farmers
During the debate, several MPs pointed out the impact on people who depend on tobacco farming. BJP MP Daggubati Purandeswari opened the discussion. She said that 60 lakh farmers and nearly two crore workers rely on the tobacco sector.
She agreed that higher taxes protect public health. However, she urged the government to consider the financial stability of tobacco farmers. She said farmers support health measures but still need protection when major tax changes affect their main source of income.
