From Feb 1 2026, India’s tax overhaul will make cigarettes costlier, pushing prices up as excise duty and GST rise; an ₹18 stick could cost ₹21-₹22.
The excise duty will apply on top of the existing 40% GST on cigarettes. (Photo: Social Media)
Smokers in India should prepare to pay more for cigarettes from February 1, 2026. The central government has announced a fresh excise duty on tobacco products, a move that will increase retail prices across brands and sizes.
The decision will impact an estimated 10 crore smokers in the country. The new levy comes alongside the existing Goods and Services Tax and marks a major change in how tobacco products are taxed in India.
The government has introduced an additional excise duty on cigarettes based on their length. The duty ranges from ₹2,050 to ₹8,500 per 1,000 sticks. This new tax will come into effect from February 1.
The excise duty will apply on top of the existing 40% GST on cigarettes. At the same time, the GST compensation cess on tobacco products will be removed from that date.
Bidis will continue to attract a lower GST rate of 18%. Pan masala and chewing tobacco will face extra levies under the Health and National Security Cess.
The price impact will vary by brand and size. However, industry estimates suggest a noticeable jump in retail prices.
A cigarette currently priced at ₹18 per stick is expected to cost around ₹21 to ₹22 after the new excise duty takes effect. This reflects an increase of nearly 15–20%, depending on how companies pass on the tax burden to consumers.
A standard pack of cigarettes is also likely to become significantly costlier, affecting daily smokers the most.
The tax change follows Parliament’s approval of new laws allowing the government to impose excise duty on tobacco and a special cess on pan masala.
The move aims to simplify India’s indirect tax structure while keeping tobacco products heavily taxed. The government also sees higher tobacco taxes as a public health measure to discourage smoking.
The announcement triggered a sharp reaction in the stock market. Shares of major cigarette makers saw heavy losses as investors reacted to the possibility of higher prices and lower sales volumes.
Analysts believe cigarette companies may need to raise prices by at least 15% to offset the impact of the new excise duty. Cigarettes contribute a large share of revenue for these firms, making the tax change significant for their earnings.
Retail prices are likely to be revised soon after February 1, and smokers may see new price labels across shops and kiosks.
Some consumers may shift to cheaper alternatives or reduce consumption due to higher costs. Others may continue buying at increased prices, especially for premium brands.
The government hopes the tax hike will reduce tobacco consumption over time while also boosting revenue. India continues to face a high health burden from smoking-related diseases.
By raising prices, policymakers aim to make tobacco less affordable, especially for younger users and first-time smokers.
For now, February 1, 2026, marks a turning point for cigarette prices in India, with smokers set to feel the impact directly in their wallets.
