Daijiworld Media Network – New Delhi

New Delhi, Jan 1: Smoking is set to pinch the pockets of nearly 10 crore smokers across the country, with the Union government imposing an additional excise duty on tobacco products effective February 1, 2026, making cigarettes and related products more expensive.

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, under which cigarettes will attract an excise duty ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on their length.

The move had an immediate impact on the stock market, with shares of major cigarette manufacturers coming under pressure. ITC, the country’s largest cigarette maker and manufacturer of brands such as Gold Flake and Classic, fell around 2% and emerged as the biggest loser on the Nifty 50 index. Godfrey Phillips India, which distributes Marlboro cigarettes in India, declined by over 4%. The FMCG index was also trading about 0.6% lower.

At present, tobacco products attract a Goods and Services Tax (GST) of 40%. The new excise duty will be levied over and above GST, replacing the compensation cess that has now been done away with as part of the government’s broader GST rationalisation exercise.

From February 1, tobacco products including pan masala and cigarettes will continue to attract 40% GST, while bidis will be taxed at a lower rate of 18%. In addition, a Health and National Security Cess will be imposed on pan masala, and tobacco and allied products will face the newly notified excise duty.

The Parliament had approved two bills in December enabling the levy of the Health and National Security Cess on pan masala and the imposition of excise duty on tobacco products. The government has now formally notified February 1, 2026, as the date from which these changes will come into force. On the same day, the existing GST compensation cess on tobacco products will cease to apply.