Will cigarette, pan masala prices go up as Centre tables two new bills? Know how much tax you will pay on tobacco products

Union Finance Minister Nirmala Sitharaman tabled two bills during the ongoing winter session of Parliament. The bills seek to review taxes on tobacco and pan masala. Ever since the bills came into effect, people have been wondering whether cigarettes and pan masala will become expensive.

FM Sitharaman introduces two bills for tobacco and pan masala tax

1. Central Excise (Amendment) Bill, 2025
2. Health Security and National Security Tax Bill, 2025

With these two bills, the government aims to review taxes on tobacco and pan masala. For cigarettes, the Central Excise (Amendment) Bill will replace the Central Excise Act, 1944, which imposed additional excise duty. The Health Security and National Security Levy Bill for pan masala and gutka was introduced on Thursday. Currently, the government imposes three types of taxes on tobacco products: GST, Customs Duties and Compensation Levy.

Central Excise (Amendment) Bill, 2025

The bill proposes to change the GST deduction currently applicable on all tobacco products such as cigarettes, chewing tobacco, cigars, hookah, zarda and scented tobacco. Currently, tobacco is charged 28 per cent GST plus deduction at various rates. The Central Government will increase this rate to 40 percent at a later date.

Government taxes on tobacco products

1. The tax on cigarettes varies depending on the size of the stick and the type of tobacco product.
2. Currently, a 65 millimeter long cigarette attracts a tax of Rs 200 for every 1000 cigarette sticks.
3. According to the new bill, a tax of 2,700 Rupees per 1,000 cigarette sticks will be imposed on cigarettes that are unfiltered and do not exceed 65 millimeters in length.
4. The tax on cigarettes exceeding 65 millimeters in length but not exceeding 70 millimeters will be Rs 4,500 per 1,000 sticks. The current tax is Rs 250 per 1000 sticks.
5. The tax on cigars and cigars is proposed to be 25 per cent or Rs 5,000 per 1,000 sticks, whichever is higher.
6. The new bill proposes to impose a 60-70 percent special consumption tax on unprocessed tobacco.

Health Security and National Security Tax Bill, 2025

FM Sitharaman, who introduced the bill for discussion in the Lok Sabha on Thursday, said the tax would be imposed on the production capacity of pan masala units and this was a disadvantage.

Pan masala will attract 40% GST

Pan masala will continue to attract the maximum Goods and Services Tax (GST) of 40 per cent, the minister said. Moreover, this Health and National Security Tax will also be levied on the production capacity of pan masala producers.

Will new rates increase cigarette prices?

The new rates are higher than the current rates. However, CA Deep Karodia said that even after the two laws become law, the prices of cigarettes and other tobacco products will not increase much. He added that tobacco rates will increase once the new GST rate of 40 percent is notified, including the Cess will, reported Bhaskar English.

When will the new rates take effect?

According to the copy of the bill, the new rates ‘may come into force on the date determined by the Central Government with the announcement to be made in the Official Gazette.