Smoking might seem like a temporary refute from the stress and anxiety, but it comes with strong underlying effects on our health. Smoking tobacco has also posed as a major drain on India’s natural resources. The government took a major step to address this issue by issuing warning mandates and setting tax rates, which will help in reducing consumption.
The introduction of taxes as a reform by the government
According to Reuters, Nirrmala Sitaram mentioned, “ Certainly we don’t want cigarettes to become affordable”, while she was seeking parliament’s approval for taking this measure. The total taxes on cigarettes in India currently result in approximately 53% of retail prices. The amount is considerably lower than the benchmark of 75%, which is set by the World Health Organisation (WHO). These rates are set higher to reduce the amount of consumption and factor in the purchasing power, she added, while citing WHO’s data.
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The Central Excise (Amendment) Bill 2025
The amendment will replace a temporary levy on certain products, which consist of certain luxury items and cigarettes. The taxes on cigarettes currently include a 28% goods and services tax, paired with other additional levies. The new bill will put up a value-based tax, which may range from Rs 2,700 to Rs 11,000 ($29 and $122) per thousand sticks and will be dependent on their size. It will be in addition to a 40% GST. Bipin Sapra, partner at EY India, commented, “ The proposed rates of excise duty are 25% to 40% higher on average, as compared with the present taxes.” The leading cigarette manufacturers, like the ITC and Godfrey Phillips, are yet to comment publicly on these changes.
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Finance Minister Nirmala Sitharaman did not directly specify how the tax would have an effect on the cigarette prices. It is expected that the law will increase taxes, which will ultimately lead the company to increase prices. According to the WHO, tobacco consumption is one of the major causes of death and disease in India and accounts for up to 1.35 million deaths every year. ‘It is expected to be an effective measure from the government to control the consumption of tobacco, where high taxes are being imposed to inculcate global best practices,’ mentioned Bipin Sapra.
