40% GST from Feb 1: How Much a Cigarette Costs

Tobacco products in India are set to become more expensive from February 1 as the central government raises taxes on cigarettes, pan masala, and related items. Under the new decision, these products will attract a 40 % GST along with fresh excise duties and cess, pushing prices sharply higher.

According to the notification, the government has introduced an additional excise duty on cigarettes and a new cess on pan masala. These will be charged over and above the existing tax structure. Earlier, tobacco products were taxed at 28 percent GST along with a compensation cess. With the compensation cess nearing its end, the government has opted for a new duty to keep taxes high and prevent any price drop.

The excise duty on cigarettes will range between Rs 2,500 and Rs 8,500 per 1,000 sticks, depending on the length and type. Some categories may attract even higher rates. Analysts say this could lead to a steep increase in retail prices, especially for low cost cigarette brands. Cheaper cigarettes priced around Rs 10 to Rs 18 per stick may see a sharp jump, while premium brands are expected to absorb the impact better.

The government says the move is aimed at boosting revenue and reducing tobacco consumption due to health concerns. However, companies are likely to pass the higher costs to consumers, which could affect demand.

The announcement has already impacted the stock market. Shares of major tobacco companies such as ITC and Godfrey Phillips fell sharply as investors reacted to concerns over higher taxes and possible slowdown in sales.