The Indian government has announced that cigarette prices across the country will rise starting February 1, 2026 following significant changes to the taxation framework on tobacco products. Under the new rules, a separate excise duty will be levied in addition to the existing Goods and Services Tax (GST), marking a major adjustment in cigarette taxation after years of stable rates.
New Excise Duty Structure Explained
Previously, cigarettes were primarily taxed through GST and a value-based levy. The revamped system imposes a specific excise duty per 1,000 sticks, which varies according to whether the cigarette is filtered or non-filtered and its length including the filter. As a result:
- Short non-filter cigarettes (up to 65 mm) will face a lower duty per stick.
- Filtered and longer cigarettes (above 65 mm) will attract progressively higher duties.
- Some non-standard or uniquely designed sticks fall under the highest levies.
The excise duty ranges from about ₹2,050 to ₹8,500 per 1,000 sticks, meaning the added tax per cigarette increases with size and category.
Impact on Popular Brands
The new tax regime is expected to affect mid-to-premium cigarette segments more sharply. Longer and premium variants — often including well-known brands — will likely see higher price increases because of the elevated excise duty. Shorter, mass-market cigarettes are expected to see smaller hikes.
Brands that could experience notable price adjustments include Classic, Gold Flake, Marlboro and other king-size or premium sticks, as these fall into higher excise brackets based on length and filter type.
Tax Burden and Consumer Prices
The new excise duty will be charged on top of GST, which applies at either 18 % or 40 % depending on product categorisation. With the withdrawal of the GST compensation cess, the excise duty becomes the main additional levy targeting cigarettes. Even after these changes, total taxes on cigarettes may still remain below international recommendations but will represent a significant portion of retail prices.
Industry Response and Market Outlook
Analysts expect the tax changes could result in volume contraction in cigarette sales as prices rise, particularly in mid and premium segments. However, the financial strength of major tobacco companies is anticipated to remain robust despite the headwinds. Some manufacturers may choose to absorb part of the tax on lower-price products to maintain sales, while premium products may see most of the hike passed to buyers.
