Central Excise Amendment Bill 2025 passed; paves way for higher tobacco tax

The Parliament on Thursday, December 4, passed the Central Excise (Amendment) Bill, 2025, paving the way to levy a higher excise duty on tobacco and related products once the GST compensation cess ends, despite sharp criticism from Opposition leaders.

Now cleared by both Houses, the Rajya Sabha has returned the Bill to the Lok Sabha as part of the legislative process.

Once enacted into law, it will allow the government to increase the rate of central excise duty on tobacco and related products after the GST compensation cess ends.

Tobacco and related products, at present, have a 28% goods and services tax (GST) plus cess at a varied rate.

The Bill proposes an excise duty of 60-70% on unmanufactured tobacco while excise on cigars and cheroots is proposed at 25% or ₹5,000 per 1,000 sticks.

It also proposes that cigarettes be taxed in the range of ₹2,700-11,000 per 1,000 sticks, depending on length and filter, and chewing tobacco be taxed at ₹100 per kg.

Opposition leaders criticised the real intent behind the Bill. “The Bill’s real objective seems to be revenue generation, not health protection,” Opposition party Congress posted on X.

Congress MP Jebi Mather said the Bill “exemplifies everything wrong with the implementation of GST regime by the central government,” adding that it carries only a “notional security” with no real impact on people’s health and well-being.   

Finance Minister Nirmala Sitharaman assured the House that tobacco products will still be taxed under the demerit category at 40% in the GST regime.

She said farmers across Andhra Pradesh, Karnataka, Bihar, West Bengal, and Maharashtra are being encouraged to give up tobacco and grow other cash crops.

“In these states, more than one lakh acres of land are shifting from tobacco cultivation to other crops,” she said.