Tobacco excise duty not extra tax, revenue to be shared with states: FM
GST
Dated:- 3-12-2025
PTI
New Delhi, Dec 3 (PTI) Excise duty sought to be levied on tobacco and its products through a new Bill will ensure that tax incidence on demerit items does not fall after the recent GST overhaul, Finance Minister Nirmala Sitharaman said, vowing to share revenues collected with states.
Replying to the debate on the Central Excise (Amendment) Bill in the Lok Sabha, Sitharaman said this is not an additional tax, and the tax burden, as currently applicable under the GST regime, will continue.
The Lok Sabha later passed the Bill with a voice vote.
The provisions of the Bill will come into effect once the GST compensation cess, which is
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ty of Rs 2,700 to Rs 11,000 per 1,000 sticks of various categories of cigarettes. The Bill also proposes a levy of 60-70 per cent on every kilogram of tobacco used for various purposes and 100 per cent per kg on chewing tobacco.
Quoting the World Health Organisation (WHO) observation that cigarette affordability has either stagnated or increased in the past decade in India, Sitharaman said that cess rates on cigarettes have remained unchanged since 2017, when GST was implemented.
She said that before GST, tax rates of tobacco were increased every year, so that high prices act as a deterrent to the consumption of the demerit good. After the sunset of compensation cess, the government is bringing back the excise duty, which existed prior to
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e levy of GST and compensation cess on tobacco and its products, the rates of central excise duties were reduced significantly to allow for the levy of compensation cess without a substantial impact on tax incidence.
Sitharaman also clarified that there is no change in the tax incidence on beedi even after the levy of the excise duty.
With regard to concerns of MPs on the livelihood of farmers, Sitharaman said the government is trying to wean away farmers from growing tobacco and encouraging them to diversify to other crops.
“In order to ensure that the incidence is not lower than what it was during GST with the compensation cess, we are bringing this excise. In a way, we are saying cigarettes should not become affordable now because inc
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