Tobacco-Cigarette Excise Amendment Bill 2025 Passed in Lok Sabha

The Tobacco-Cigarette Excise Amendment Bill 2025 was passed in the Lok Sabha on Wednesday after changes to the GST rates. The aim of this bill is to continue heavy taxes on tobacco and cigarettes to discourage their sale and consumption. The Finance Minister clarified during the discussion that this bill is not about imposing a cess, but rather about increasing excise duties on harmful items like tobacco and cigarettes. She emphasized that 41% of the revenue generated from this law will be allocated to the states.

Under this excise law, the government intends to collect significantly higher taxes on tobacco and cigarette products to make them less affordable and to promote public health awareness. However, the excise law does not include beedi (traditional Indian cigarette) under its scope.

Finance Minister Nirmala Sitharaman mentioned that the government is also advising tobacco farmers to shift to alternative crops. States like Uttar Pradesh, Bihar, Andhra Pradesh, and Telangana are the major producers of tobacco, and farmers in these regions are gradually turning to other crops. Between 2018 and 2022, over 45,323 hectares of land were used for cultivating other crops instead of tobacco.

Sitharaman noted that countries like Australia, New Zealand, and Turkey have increased the prices of tobacco and cigarettes significantly in the past few years, but India has not implemented such increases. The World Health Organization (WHO) has also raised concerns regarding this issue, stating that tobacco products have become more affordable in India.

The Finance Minister clarified that several members of Parliament had misunderstood the Tobacco-Cigarette Excise Amendment Bill as a new cess. She explained that the cess was abolished with the implementation of the GST system in 2017. At that time, a five-year provision for a compensation cess was introduced, which was named the "Compensation Cess." Currently, a 28% GST and cess are levied on tobacco, cigarettes, and pan masala products.

Following the decision to modify the GST system on September 3, no new cess has been applied to any other items. The 28% GST slab has been removed and replaced with a 40% slab, but tobacco and cigarettes are still subject to the 28% GST and cess. After the passage of the new law, the government may bring tobacco and cigarettes under the 40% GST slab, with a decision to be made by the GST Council, chaired by the Finance Minister.