Cigarette Prices Surge by Rs 22 to 25 After New Excise Duty Implementation

Cigarette prices have surged by Rs 22 to 25 per pack of 10 sticks due to new excise duties starting Sunday. Distributors report that premium cigarettes, measuring 76 mm, will now cost between Rs 50 and Rs 55 per pack, depending on the brand. Although manufacturers haven't updated MRPs yet, distributors are billing old stock with a 40% GST.

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With wholesale markets closed on Sunday, distributors anticipate fresh stock with updated MRPs will be available from Monday. A pack of Wills Navy Cut, a popular mid-sized cigarette at 76 mm, previously priced at Rs 95 for 10 sticks, is expected to rise to Rs 120. Cigarettes like Gold Flake Lights and Wills Classic, measuring 84 mm and priced at Rs 170 per pack, may increase to Rs 220-225.

Impact on Retailers and Distributors

Distributors expect new MRP-labelled cigarette packs from manufacturers by month's end. Some companies have paused stock releases until billing aligns with the new tax structure. A stockist mentioned that stocks would be released after billing under the revised tax framework.

The All India Consumer Products Distributors Federation (AICPDF) warns that sharp tax increases on legal sin products could harm traditional retail systems. These systems already face competition from online platforms and quick-commerce giants. Tobacco remains one of the few categories where small shopkeepers are still relevant.

Concerns Over Illicit Trade

Distributors fear that price hikes might lead to increased smuggling and counterfeit products. "If this too is pushed into the hands of illicit networks, what will be left for honest retailers? This is not just about taxation—it is about survival," stated AICPDF President D Patil.

The additional excise duty on cigarettes and tobacco products, along with a health cess on pan masala, took effect from February 1. This is above the highest GST rate of 40%. The cess and excise levies replaced the previous 28% GST plus compensation cess on these goods since GST's introduction in July 2017.

New Tax Structure Details

Under the new tax regime, short non-filter cigarettes up to 65 mm incur an extra duty of about Rs 2.05 per stick. Short filter cigarettes of the same length are charged around Rs 2.10 per stick. Medium-length cigarettes (65-70 mm) face an additional duty of roughly Rs 3.6-4 per stick, while long premium cigarettes (70-75 mm) incur about Rs 5.4 per stick.

The highest duty of Rs 8.50 per stick applies only to unusual or non-standard cigarette designs, which most popular brands do not fall under. Parliament approved the levy of such a cess on pan masala and excise duty on tobacco in December.

The GST Council decided in September 2025 to levy cess and excise duty over GST once the compensation cess mechanism ended after loan repayment. The compensation cess was set to cease after repaying loans taken to compensate states for GST revenue loss during Covid-19. The Rs 2.69 lakh crore loan was scheduled for repayment by January 31, 2026.

With inputs from PTI