New Excise Duty on Tobacco Products Expected to Raise Cigarette Prices by Rs 55 per Pack
After the implementation of a new excise duty regime, cigarette prices in India have seen a significant increase, with packs of 10 sticks now costing between Rs 22 and Rs 25 more than previously. This price hike follows the government’s decision to raise taxes on cigarettes for the first time in nearly seven years, aligning India’s tobacco taxation with global public health standards. The new tax structure, approved by Parliament in December, will replace the existing GST compensation cess framework established during the rollout of the Goods and Services Tax (GST) in July 2017.
Impact of the New Tax Structure
The recent changes in taxation have led to varying increases in cigarette prices based on the type and length of the product. Distributors report that premium cigarettes, particularly those measuring 76 mm, will see a price increase of Rs 50 to Rs 55 per pack of 10 sticks, depending on the brand. While manufacturers have yet to announce revised maximum retail prices (MRPs), distributors are currently billing retailers for old stock at a 40% GST rate. With wholesale markets closed on Sundays, fresh stock reflecting the new MRPs is anticipated to be available starting Monday.
For example, a pack of Wills Navy Cut (76 mm), which was previously priced at Rs 95, is expected to rise to approximately Rs 120. Similarly, cigarettes measuring 84 mm, such as Gold Flake Kings and Wills Classic, which currently cost Rs 170, are projected to increase to between Rs 220 and Rs 225 per pack. Slim cigarettes, like Classic Connect (97 mm), are also expected to see a price jump from Rs 300 for a pack of 20 sticks to around Rs 350.
Concerns Over Smuggling and Counterfeiting
The All India Cigarette and Tobacco Distributors Federation (AICPDF) has expressed concerns that the price hikes could lead to a rise in smuggling and the proliferation of counterfeit products. With approximately 8,000 to 9,000 stockists of cigarettes and tobacco products across India, the federation warns that the increased costs may push consumers towards illicit markets. A stockist noted that some companies have already paused their stock releases until they can adjust to the new tax structure, emphasizing that the issue extends beyond taxation to the survival of honest retailers.
The stockist highlighted the importance of small shopkeepers in the tobacco market, stating, “If this too is pushed into the hands of illicit networks, what will be left for honest retailers?” This sentiment underscores the broader implications of the tax changes on local businesses and the potential for increased illegal trade.
Future Taxation Changes
Looking ahead, from February 2026, cigarettes and tobacco products will incur additional excise duties and cess on top of the highest 40% GST slab. This new structure will replace the current system, which includes a 28% GST plus compensation cess. The amendments to the Central Excise Act will introduce a per-stick excise duty on cigarettes, with rates varying according to the length of the product. These changes are part of the government’s ongoing efforts to regulate tobacco consumption and align with international health standards, but they also raise significant concerns about the potential impact on legal sales and the rise of illegal markets.
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