Excise Duty Rates on Tobacco Revised to Prepare for End of Compensation Cess; Government Updates Tobacco Excise Tariffs to Maintain Tax Incidence After Cess Withdrawal; New Excise Structure Introduced for Tobacco and Nicotine Products Under Fourth Schedule; Uniform 70% Duty Imposed on Multiple Tobacco Categories Under Revised Excise Table; Specific Excise Duties on Cigarettes Increased Through New Tariff Substitution; High Excise Rates Set for Chewing Tobacco, Jarda, and Snuff in New Tariff Schedule; Excise Overhaul for Tobacco Products Introduced to Replace Earlier Reduced Duty Regime.
The Central Excise (Amendment) Bill, 2025 was introduced in the Lok Sabha on 1 December 2025 as Bill No. 143 of 2025. The Bill seeks to amend the Central Excise Act, 1944. It will come into force on a date to be notified by the Central Government in the Official Gazette.
The main amendment concerns the substitution of the existing table under Section IV of the Fourth Schedule to the Central Excise Act. The new table specifies revised tariff headings, descriptions, units, and rates of duty applicable to tobacco and tobacco products. The revised table covers unmanufactured tobacco, cigarettes, cigars, cheroots, cigarillos, tobacco refuse, smoking mixtures, chewing tobacco, snuff, reconstituted tobacco, tobacco substitutes, and nicotine-based products.
Under tariff heading 2401 relating to unmanufactured tobacco and tobacco refuse, the amended table prescribes a 70% excise duty rate for several categories of tobacco, including flue-cured virginia tobacco, sun-cured country tobacco, sun-cured virginia tobacco, burley tobacco, and tobacco used for the manufacture of biris, chewing tobacco, cigars, cheroots, and hookah tobacco. Tobacco that is partly or wholly stemmed or stripped is also subject to a uniform 70% duty across listed categories. Tobacco refuse (24013000) attracts a duty rate of 60%.
Tariff heading 2402 addresses cigars, cheroots, cigarillos, and cigarettes. Cigars and cheroots attract 25% duty or ₹5,000 per thousand, whichever is higher. Cigarillos fall under a similar rate structure. Cigarettes are categorised by length and filter specifications, with specific rates ranging from ₹2,700 to ₹11,000 per thousand. Cigarettes of tobacco substitutes and cigarillos of tobacco substitutes attract rates based on a combination of percentage and specific duties.
Tariff heading 2403 covers other manufactured tobacco and substitutes. Hookah or gudaku tobacco is subject to 40% duty under 2403 11 10. Smoking mixtures for pipes and cigarettes attract 325% under 2403 19 10. Biris manufactured without the aid of machines are taxed at 10%, and certain other categories also attract 10% duty. “Homogenised” or “reconstituted” tobacco carries a 70% rate. Chewing tobacco, preparations containing chewing tobacco, jarda scented tobacco, and snuff-related products have higher duty rates ranging from 70% to 100%. Tobacco extracts, essence, and cut tobacco are also included with specific rates provided. A residual category under 2403 99 90 attracts 125% duty.
Tariff heading 2404 covers products containing tobacco, reconstituted tobacco, nicotine, or substitutes intended for non-combustion inhalation or other intake. Products intended for inhalation without combustion containing tobacco or reconstituted tobacco attract 100% duty. Other products in this category, including oral and transdermal applications, have placeholders indicating duty rates to be prescribed.
The Statement of Objects and Reasons explains that after the introduction of GST on 1 July 2017, the Central Excise Act, 1944 was largely repealed except for goods under Entry 84 of List I of the Seventh Schedule, which includes tobacco and tobacco products. With GST and compensation cess applied to these goods, central excise duty rates were earlier reduced significantly to accommodate the cess without substantially changing the overall tax burden.
However, compensation cess will be discontinued once liabilities under the compensation cess account are discharged. The Statement notes that the Government requires the fiscal ability to increase central excise duty rates on tobacco and tobacco products so that the tax incidence on these goods can be protected once the cess ends. Therefore, the Bill proposes to amend the tariff table for tobacco and tobacco products in Section IV of the Fourth Schedule.
The Bill seeks to replace the existing tariff table to provide the Government with this fiscal space. The Financial Memorandum states that the Bill will not involve any expenditure from the Consolidated Fund of India, whether recurring or non-recurring.
AS INTRODUCED IN LOK SABHA
The following Bills was introduced in Lok Sabha on 1st December, 2025:—
THE CENTRAL EXCISE (AMENDMENT) BILL, 2025
Bill No. 143 of 2025
A Bill further to amend the Central Excise Act, 1944.
BE it enacted by Parliament in the Seventy-sixth Year of the Republic of India as follows:—
1. Short title and commencement.
(1) This Act may be called the Central Excise (Amendment) Act, 2025.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
2. Amendment of Fourth Schedule.
In the Central Excise Act, 1944, in the Fourth Schedule, in Section IV, for the Table occurring under the sub-heading “Supplementary Notes”, the following Table shall be substituted, namely:––
| ‘Tariff item | Description of goods | Unit | Rate of duty |
|
(1)
|
(2) | (3) | (4) |
| 2401 | Unmanufactured Tobacco; Tobacco Refuse | ||
| 240110 | – Tobacco, not stemmed or stripped: | ||
| 24011010 | — Flue cured virginia tobacco | kg. | 70% |
| 24011020 | — Sun cured country (natu) tobacco | kg. | 70% |
| 24011030 | — Sun cured virginia tobacco | kg. | 70% |
| 24011040 | — Burley tobacco | kg. | 70% |
| 24011050 | — Tobacco for manufacture of biris,
not stemmed |
kg. | 70% |
| 24011060 | — Tobacco for manufacture of
chewing tobacco |
kg. | 70% |
| 24011070 | — Tobacco for manufacture of cigar
and cheroot |
kg. | 70% |
| 24011080 | — Tobacco for manufacture of hookah
tobacco |
kg. | 70% |
| 24011090 | — Other | kg. | 70% |
| 240120 | – Tobacco, partly or wholly stemmed or stripped: | ||
| 24012010 | — Flue cured virginia tobacco | kg. | 70% |
| 24012020 | — Sun cured country (natu) tobacco | kg. | 70% |
| 24012030 | — Sun cured virginia tobacco | kg. | 70% |
| 24012040 | — Burley tobacco | kg. | 70% |
| 24012050 | — Tobacco for manufacture of biris | kg. | 70% |
| 24012060 | — Tobacco for manufacture of
chewing tobacco |
kg. | 70% |
| 24012070 | — Tobacco for manufacture of cigar and cheroot | kg. | 70% |
| 24012080 | — Tobacco for manufacture of hookah tobacco | kg. | 70% |
| 24012090 | — Other | kg. | 70% |
| 24013000 | – Tobacco refuse | kg. | 60% |
| 2402 | Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes | ||
| 240210
|
– Cigars, cheroots and cigarillos, containing tobacco: | ||
| 24021010 | — Cigar and cheroots Tu | 25% or | |
| Rs. 5000 per thousand whichever is higher |
|||
| 2402 10 20 | —Cigarillos | Tu | 25% or
Rs. 5000 per thousand whichever is higher |
| 2402 20 | – Cigarettes, containing tobacco:
|
||
| 2402 20 10 | — Other than filter cigarettes, of length not exceeding 65 millimetres
|
Tu | Rs. 2700 per
thousand
|
| 2402 20 20 — | Other than filter cigarettes, of length exceeding 65 millimetres but not exceeding 70 millimetres
|
Tu | Rs. 4500 per
thousand
|
| 2402 20 30 | — Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres
|
Tu | Rs. 3000 per thousand
|
| 2402 20 40 | — Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres but not exceeding 70 millimetres
|
Tu | Rs. 5200 per thousand
|
| 2402 20 50 — | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 70 millimetres but not exceeding 75 millimetres
|
Tu | Rs. 7000 per thousand
|
| 2402 20 90 | — Other | Tu | Rs. 11000 per thousand
|
| 2402 90 | – Other:
|
||
| 2402 90 10 | — Cigarettes of tobacco substitutes | Tu | Rs. 5000 per thousand
|
| 2402 90 20 | — Cigarillos of tobacco substitutes | Tu | 14% or Rs. 5000 per thousand whichever is higher
|
| 2402 90 90 | — Other | Tu | 14% or Rs. 5000 per thousand whichever is higher
|
| 2403 | Other manufactured tobacco and manufactured tobacco substitutes; “Homogenised” or “Reconstituted” tobacco;
Tobacco extracts and essences – Smoking tobacco, whether or not containing tobaccosubstitute in any proportion; |
||
| 2403 11 | — Water pipe tobacco specified in Sub-heading Note to this Chapter:
|
||
| 2403 11 10 | — Hookah or gudaku tobacco | kg. | 40%
|
| 2403 11 90 | — Other | kg. | 40%
|
| 2403 19 | — Other: | ||
| 2403 19 10 | — Smoking mixtures for pipes and cigarettes
— Biris:
|
kg. | 325%
|
| 2403 19 21 | — Other than paper rolled biris, manufactured without the aid ofmachine
|
Tu | 10%
|
| 2403 19 29 | —- Other | Tu | 10%
|
| 2403 19 90 | — Other
– Other:
|
kg. | 22%
|
| 2403 91 00 | — “Homogenised” or “reconstituted” tobacco
|
kg. | 70%
|
| 2403 99 | — Other:
|
||
| 2403 99 10 | — Chewing tobacco | kg. | 100%
|
| 2403 99 20 | — Preparations containing chewing tobacco
|
kg. | 100%
|
| 2403 99 30 | — Jarda scented tobacco | kg. | 100%
|
| 2403 99 40 | — Snuff | kg. | 70%
|
| 2403 99 50 | Preparations containing snuff | kg. | 70%
|
| 2403 99 60 | — Tobacco extracts and essence | kg. | 70%
|
| 2403 99 70 | — Cut-tobacco | kg. | 10%
|
| 2403 99 90
2404 |
— Other | kg. | 125% |
| 2404 | Products containing tobacco, reconstituted tobacco, nicotine, or tobacco or nicotine substitutes, intended for inhalation without combustion; other nicotine containing products intended for the intake of nicotine into the human body – Products intended for inhalation without combustion | ||
| 2404 11 00 | — Containing tobacco or reconstitutedto bacco | kg. | 100% |
| 2404 12 00 | — Other, containing nicotine | kg. | …..
|
| 2404 19 00 | — Other
– Other: |
kg. | 100% |
| 2404 91 00 | – For oral application | kg. | ….. |
| 2404 92 00 | — For transdermal application | kg. | ….. |
| 2404 99 00 | — Other | kg. | …..’. |
STATEMENT OF OBJECTS AND REASONS
With the introduction of the Goods and Services Tax (GST) on 1st July, 2017, the Central Excise Act, 1944 was repealed by section 174 of the Central Goods and Services Tax Act, 2017, except in respect of goods listed under Entry 84 of List I of the Seventh Schedule to the Constitution. This includes tobacco and tobacco products. With the levy of GST and compensation cess on tobacco and tobacco products, the rates of Central Excise duties were reduced significantly to allow for the levy of compensation cess without large impact on their tax incidence.
2. Compensation cess levied on tobacco and tobacco products, wherever applicable, will be discontinued once interest payment obligations and loan liabilities under the compensation cess account are completely discharged. In order to give the Government, the fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence, it is imperative to amend the table in Section IV of the Fourth Schedule to the said Act.
3. Accordingly, it is proposed to introduce the Central Excise (Amendment) Bill, 2025 in Parliament to substitute the table containing the tariff rates of tobacco and tobacco products in Section IV of the Fourth Schedule to the Central Excise Act, 1944.
4. The Bill seeks to achieve the above objectives.
NEW DELHI;
The 28th November, 2025.
NIRMALA SITHARAMAN.
FINANCIAL MEMORANDUM
The Bill, if enacted, will not involve any expenditure, either recurring or non-recurring in nature, from the Consolidated Fund of India.
