Daijiworld Media Network – New Delhi

New Delhi, Dec 3: The Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill 2025 by voice vote, paving the way for higher excise duty on tobacco and related products once the GST compensation cess comes to an end. The bill, introduced on Monday, seeks to amend the Central Excise Act, 1944, and restructure tax rates on tobacco after the cess liabilities are fully settled.

The revised excise framework will replace the existing GST compensation cess on cigarettes, cigars, chewing tobacco, hookah, zarda and scented tobacco. Finance Minister Nirmala Sitharaman, while addressing the House, clarified that the bill does not impose any “additional tax” on tobacco products.

“This is not a new law, this is not an additional tax or something that the Centre is taking away. Many MPs observed that this is a cess. This is not a cess, this is excise duty. Excise duty existed before GST. The amount will be redistributed to the states as per the Finance Commission's recommendations,” she assured.

Currently, tobacco products attract 28% GST along with a variable cess. Under the proposed tax structure, unmanufactured tobacco will face an excise duty of 60–70%, while cigars and cheroots will attract 25% or Rs 5,000 per 1,000 sticks, whichever is higher. For cigarettes, duties will range from Rs 2,700 per 1,000 sticks for lengths up to 65 mm without filters, to Rs 4,500 per 1,000 sticks for lengths up to 70 mm.

Sitharaman said the revised excise ensures that the overall tax incidence on tobacco — considered a demerit good — remains unchanged even after the GST compensation cess ends.