Nil Excise Duty Granted on Unbranded, Non-Retail Tobacco to Differentiate Raw Trade from Consumer Market

CBIC amends notification no. 03/2025 dated 31.12.2025, to prescribe nil rate on unmanufactured tobacco or tobacco refuse, not bearing a brand name and not packed for retail sale

The government has amended the earlier Central Excise notification to revise duty treatment on unmanufactured tobacco and tobacco refuse, creating a clear distinction based on branding and retail packaging. Under the new amendment, such tobacco falling under tariff heading 2401 will attract a nil rate of excise duty only when it does not bear a brand name and is not packed for retail sale, effectively targeting raw, bulk, or agricultural-stage tobacco supplies that are not meant for direct consumer markets. At the same time, a new entry has been inserted prescribing an 18% excise duty on all other forms of unmanufactured tobacco or tobacco refuse under the same tariff heading that do not meet these two conditions. This change narrows the earlier blanket approach and ensures that concessional treatment is restricted to genuine unprocessed and non-commercially branded supplies, while preventing misuse by products that are closer to market-ready or branded trade channels. The amendment reflects a policy intent to support primary-stage tobacco trade while maintaining revenue safeguards and regulatory oversight over commercially positioned tobacco goods. By restructuring the duty table and inserting a separate serial entry, the notification provides clarity for classification, reduces interpretational disputes, and aligns excise treatment with the nature, branding status, and end-use positioning of the tobacco product in the supply chain.

MINISTRY OF FINANCE
(Department of Revenue)

Notification No. 04/2026 – Central Excise | Dated: 1st February, 2026

G.S.R. 91(E).— In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Excise Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 03/2025-Central Excise, dated the 31^st December, 2025, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 955(E), dated the 31^st December, 2025, namely:-

In the said notification, in the Table, –

(i) For Sl. No. 1, and the entries relating thereto, the following Sl. No. and entries shall be substituted, namely: –

(ii) after Sl. No.1, the following serial number and entries relating thereto, shall be inserted, namely:-

[F. No. CBIC-190349/72/2025-TRU]
DHEERAJ SHARMA, Under Secy.

Note: The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 03/2025-Central Excise, dated the 31^st December, 2025, vide number G.S.R. 955(E), dated the 31^st December, 2025.