Cigarettes, tobacco products, and pan masala have become costlier by a significant margin from February 1, following the implementation of increased taxes by the Centre as part of the Union Budget 2026-27.
The government today has increased the excise duties and imposed a Health and National Security Cess on certain tobacco products. The GST on these products has also been hiked to 40% from the previous 28%. The compensation cess on GST has been waived.
These increases are applicable across the country.
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How the new tax structure impacts prices
Cigarette taxation has been revised based on length, filter type and design.
Short non-filter cigarettes (up to 65 mm): about ₹2.05 per stick
Short filter cigarettes (up to 65 mm): about ₹2.10 per stick
Medium-length cigarettes: about ₹3.6–₹4 per stick
Long cigarettes: about ₹5.4 per stick
Premium or non-standard cigarettes: up to ₹8.50 per stick
Industry estimates indicate that the higher tax burden will be passed on to consumers. A cigarette pack that earlier sold for around ₹18 may now cost between ₹70 and ₹72, depending on the brand.
New rules for pan masala and chewing tobacco
For pan masala and chewing tobacco, the government has changed valuation and compliance norms.
GST will now be calculated based on the maximum retail price (MRP), replacing factory-cost-based valuation. Pan masala manufacturers must obtain fresh registration under the new cess law.
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Additional compliance requirements include installation of CCTV cameras at packing units, preservation of footage for two years, and disclosure of machine capacity to excise authorities.
What the government said
The government stated that the new structure retains a high rate of taxation on harmful products while ensuring a stable revenue stream. It was also stated that the overall tax incidence on pan masala remains at around 88% levels.
With the new tax rates, consumers can expect a drastic rise in retail prices of tobacco products.
