Lok Sabha Set for Vote on Excise Bill 2025 Featuring Significant Tobacco Duty Hikes
Bill aims to replace GST compensation cess with higher excise duties to maintain tax burden and curb tobacco use
New Delhi, Dec 02 : The Lok Sabha is poised to consider and pass the Central Excise (Amendment) Bill, 2025, which seeks to discontinue the existing GST compensation cess on tobacco products and introduce significantly higher excise duties. The bill, introduced on December 1, amends the Central Excise Act, 1944, which governs duties on goods manufactured domestically.
Since the rollout of the Goods and Services Tax (GST) in 2017, most central excise duties were eliminated except on a select few items primarily tobacco and tobacco products. To compensate states for revenue losses after GST implementation, a GST compensation cess was added to these products, resulting in a combined tax structure of excise duty, GST, and compensation cess.
With compensation liabilities nearing completion, the new legislation proposes scrapping the cess and raising excise duties to preserve the current tax incidence on tobacco products. Finance Minister Nirmala Sitharaman said the amendment provides the “fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence.”
The bill outlines steep duty hikes, including:
Unmanufactured tobacco: Excise duty raised from 64% to 70%
Cigarettes: Duty increased sharply from ₹200–₹735 per 1,000 sticks to ₹2,700–₹11,000
Other tobacco products: Chewing tobacco, hookah tobacco, and smoking mixtures will also see substantial increases
The government says the move balances fiscal stability and public health objectives, aiming to discourage tobacco consumption while ensuring states do not suffer revenue losses. The bill also supports ongoing efforts to modernize India’s indirect taxation framework and reinforce regulatory oversight on tobacco products.
