New Tobacco Excise Duty Pushes Cigarette Prices Up to ₹55 per Pack

Cigarette prices are set to rise sharply from February 2026 following the introduction of a new excise duty and cess regime on tobacco products, marking India’s first tax hike on cigarettes in nearly seven years. Distributors say the increases have already started reflecting in trade billing, with a pack of 10 sticks costing at least ₹22–25 more in many segments, and premium variants seeing hikes of up to ₹50–55 per pack.

New Tax Regime Replaces GST Compensation Cess

The new levies, approved by Parliament in December, will replace the GST compensation cess framework that has been in place since the rollout of GST in July 2017. Under the revised structure, cigarettes and tobacco products will attract additional excise duty and cess over and above the highest 40% GST slab, replacing the earlier 28% GST plus compensation cess model.

Price Impact Varies by Length and Category

The extent of the increase depends on cigarette length and type. According to distributors, premium cigarettes of 76 mm length are expected to cost ₹50–55 more per pack of 10 sticks, depending on the brand. A pack of Wills Navy Cut (76 mm), previously priced at ₹95 for 10 sticks, is expected to rise to around ₹120. Cigarettes of 84 mm length—such as Gold Flake Kings and Lights, Wills Classic and Wills Classic Milds—currently priced at ₹170 per pack of 10 sticks, are expected to move to about ₹220–₹225.

Per-Stick Excise Duty Introduced

The Central Excise Act has been amended to impose a per-stick excise duty on cigarettes, with rates varying according to length. While manufacturers are yet to issue updated MRPs widely, distributors have begun billing old stock to retailers under the revised taxation framework. Fresh stock with new MRPs is expected to be lifted from wholesale markets from Monday.

Important Facts for Exams

• India has raised cigarette taxes for the first time in nearly seven years.
• New excise duty and cess will apply in addition to the 40% GST slab.
• GST compensation cess framework is being replaced for tobacco products.
• Excise duty on cigarettes will be levied on a per-stick basis, linked to length.

Smuggling and Counterfeit Risk Flags Raised

Industry distributors have warned that sharp price increases may incentivise illicit trade, including smuggling and counterfeit products. The All India Cigarette and Tobacco Distributors Federation estimates there are around 8,000–9,000 stockists across the country, and some have reported that companies temporarily held stock ahead of billing under the new tax system. Concerns remain that higher prices could shift demand towards unregulated supply chains, impacting compliant retailers and formal distribution networks.