The government has imposed additional excise duty on tobacco products from 1 February 2026, making cigarettes costlier for an estimated 10 core smokers in the world’s most populous country.
Late on Wednesday, the finance ministry notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026. That imposed an excise duty of ₹2,050-8,500 per 1,000 sticks, depending on cigarette length, effective 1 February.
The move pulled down stocks of ITC Ltd. and Godfrey Philips India Ltd. on the first trading session of the new year.
ITC, maker of Gold Flake and Classic cigarettes and the market leader, dropped 2%, while Godfrey Phillips India—the distributor of Marlboro cigarettes in India—fell 4.1%. ITC was the biggest loser on the Nifty 50 index and also led declines on the FMCG index, which was trading 0.6% lower.
Cigarette tax in India
The excise duty on tobacco products, including pan masala and cigarettes, is on top of the GST rate of 40%. It replaces compensation cess, which has been done away with as part of a broader move to rationalise goods and services tax in the world’s fourth largest economy.
From 1 February, tobacco products—including pan masala and cigarettes—will be taxed at 40% GST but bidis (rolled tobacco leaves) will attract 18% GST. On top of this, a Health and National Security Cess will be levied on pan masala, while tobacco and related products will attract additional excise duty.
The Parliament had in December approved two bills allowing levy of the new Health and National Security Cess on pan masala manufacturing and excise duty on tobacco.
On Wednesday, the government notified 1 February 2026 as implementation date for these levies. The current GST compensation cess, which is currently levied at varied rates, will cease to exist on that day.