Big shock for smokers and chewing tobacco users! From February 1, 2026, cigarettes, gutkha, pan masala and other tobacco products will become more expensive. The government has replaced the old GST compensation cess with additional excise duty on tobacco products and a new Health and National Security Cess on pan masala. These new taxes will be over and above the existing GST rates.
This change aims to keep high taxes on harmful products, protect public health and maintain government revenue. Prices may rise 15%-40% for some items – plan your budget accordingly!
Know Complete Details of Tobacco & Pan Masala Tax Changes 2026
The Finance Ministry notified these rules on December 31, 2025, after Parliament passed two Bills in December.
Key points:
- GST compensation cess on tobacco and pan masala ends from February 1, 2026.
- New regime starts: 40% GST on cigarettes, pan masala, tobacco products (18% on biris/beedis).
- Additional central excise duty on tobacco items.
- New Health and National Security Cess on pan masala.
- New rules for gutkha, chewing tobacco: Duty based on packing machine capacity (Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines Rules, 2026).
Government says overall tax burden remains similar or higher to discourage use.
New Tax Rates & Expected Price Impact from February 2026
- Cigarettes: Additional excise duty ₹2,050 to ₹8,500 per 1,000 sticks (based on length) + 40% GST. Prices likely up 15%-40%.
- Gutkha: Around 91% excise duty + GST.
- Chewing Tobacco & Jarda Scented Tobacco: Around 82% excise duty + GST.
- Pan Masala: New Health Cess (capacity-based) + 40% GST (earlier reports mention 48% cess in some cases).
- Smoking Mixtures: Up to 279%-325% duty.
- Biris/Beedis: 18% GST + additional levies.
Manufacturers like ITC and Godfrey Phillips may pass on costs – stock prices already fell sharply.
Why These Changes & How It Affects You
- Public Health: Higher prices to reduce tobacco use – linked to cancer, oral diseases.
- Revenue: Centre gets excise; part of cess for health schemes. States benefit indirectly.
- Consumers: Higher costs for smokers/chewers – good chance to quit.
- Businesses: Manufacturers face compliance (machine registration, capacity declaration); risk of evasion penalties.
- Edge Cases: Smokeless tobacco duty now machine-based to stop under-reporting; illicit trade may rise if prices too high.
No change for non-tobacco items. NCCD (calamity duty) continues separately.
This aligns with global practices – many countries raise tobacco taxes yearly.
Planning to buy tobacco products? Stock before February or consider quitting for health savings! Comment below your views.
Stay updated with us for all latest tax, budget and finance rules in 2026.