A health and national security cess and excise duty on pan masala and tobacco products respectively will be over and above 40 per cent Goods and Services Tax (GST) rate, while in case of ‘biris’ it would be on top of the 18 per cent GST rate effective February 1, 2026
GST value will be determined based on retail sale price on the package. REPRESENTATION PIC/ISTOCK
The government has notified February 1 as the date from which additional excise duty on tobacco products, and a health cess on pan masala will be levied, replacing the existing GST compensation cess levy on such ‘sin goods’.
A health and national security cess and excise duty on pan masala and tobacco products respectively will be over and above 40 per cent Goods and Services Tax (GST) rate, while in case of ‘biris’ it would be on top of the 18 per cent GST rate effective February 1, 2026, as per notifications issued by the Finance Ministry late on December 31, 2025. Cigarettes, depending on length and filter, will be taxed in the range of Rs 2050-Rs 8500 per 1000 sticks.
A new MRP-based valuation mechanism has been introduced for tobacco products (chewing tobacco, filter khaini, jarda scented tobacco, gutkha) whereby GST value shall be determined based on the retail sale price declared on the package. An additional excise duty of 91 per cent on gutkha, 82 per cent on chewing tobacco, and 82 per cent on jarda scented tobacco will be levied.
Centre’s tax revenues form part of the divisible pool, and 41 per cent of it is shared among the states. Besides, the health cess will be levied on the production capacity of pan masala manufacturing units. Part of the revenue from this cess will be shared with states through health awareness or other health-related schemes/activities.
Currently, a 28 per cent GST and a compensation cess at varying rates are levied on all tobacco products, including pan masala, cigarettes, chewing tobacco, cigars, hookah, zarda, and scented tobacco. Meanwhile, the manufacturers of chewing tobacco, gutkha and similar products have been ordered to install a functional CCTV system from February 1, covering all packing machines and preserving the footage for at least 24 months, according to a government notification.
Such manufacturers will also have to disclose to excise authorities the number of machines and their capacities, and can also claim abatement in excise duty in case a machine is non-functional for a minimum of 15 consecutive days, according to the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules notified by the Finance Ministry.
The Rules will apply to manufacturers who pack such goods in pouches. “Those manufacturing in other forms [such as tins] have to pay the applicable duty on assessable value,” an FAQ released by the Ministry said.
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