The Indian government has imposed an additional excise duty on tobacco products effective 1 February 2026, making cigarettes more expensive for an estimated 10 crore smokers across the country.
The Finance Ministry has notified the Chewing Tobacco, Jarda Scented Tobacco, and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026. Under the new framework, cigarettes will be subject to an excise duty ranging from ₹2,050 to ₹8,500 per 1,000 sticks, depending on their length.
The announcement triggered a sharp reaction in the stock market. Shares of ITC, the country&rsquo;s largest cigarette maker and market leader with brands such as Gold Flake and Classic, declined around 2%. Godfrey Phillips India, which distributes Marlboro cigarettes in India, fell by over 4%. ITC also emerged as the top loser on the Nifty 50 index and led losses in the FMCG sector.
The new excise duty comes in addition to the 40% Goods and Services Tax already applicable on cigarettes and other tobacco products. It replaces the GST compensation cess, which will be discontinued as part of the government&rsquo;s broader effort to rationalise the indirect tax regime.
From February 2026, pan masala and cigarettes will continue to attract 40% GST, while bidis will be taxed at 18%. A Health and National Security Cess will be levied on pan masala, and tobacco and related products will face additional excise duty.
Parliament had cleared two bills in December, allowing the government to introduce the new cess on pan masala manufacturing and reintroduce excise duty on tobacco products. The government has now formally set 1 February 2026 as the implementation date, marking the end of the existing GST compensation cess.
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New excise replaces GST cess, hits ITC shares and makes smoking costlier India

India Raises Cigarette Excise Duty From Feb 2026!

New excise replaces GST cess, hits ITC shares and makes smoking costlier India

January 1, 2026 | 11:50 IST