A hike in excise duty on cigarettes from February 1 is aimed at ensuring that tobacco products carry a tax burden proportionate to their severe public health impact, while also bringing India closer to global best practices in tobacco taxation, official sources said.

The Finance Ministry has notified revised excise duty rates ranging from Rs 2,050 to Rs 8,500 per 1,000 cigarette sticks, depending on length. This duty will be levied over and above the Goods and Services Tax (GST), under which cigarettes attract 28 per cent GST along with a compensation cess. Taxes on cigarettes have largely remained unchanged for the past seven years since the introduction of GST in July 2017.

Sources noted that this prolonged pause is at odds with international public health guidance, which recommends regular, preferably annual, increases in tobacco taxes so that prices rise faster than incomes. Globally, more than 80 countries revise tobacco taxes annually, often through inflation-linked or multi-year excise schedules. Even in India, excise duties on cigarettes were raised almost every year before the GST regime.

According to World Bank estimates, India’s total tax incidence on cigarettes is about 53 per cent of the retail price, well below the World Health Organization’s recommended benchmark of 75 per cent or more to significantly curb consumption. In comparison, countries such as the UK and Australia impose tax burdens exceeding 80–85 per cent, while France, New Zealand and several EU nations maintain levels above 75 per cent. Several middle-income countries have also moved closer to these benchmarks.

Sources said the revised excise duty will help maintain revenue buoyancy as the GST compensation cess ends on January 31, while preventing cigarettes from becoming more affordable. Tobacco-related diseases are estimated to cost the Indian economy over Rs 2.4 lakh crore annually, underscoring the need for calibrated tax increases aligned with health and fiscal priorities.