Parliament Clears Central Excise Amendment Bill, 2025
Cigarette duty hike to be shared with states; Sitharaman says farmers, beedi workers will not be affected
GG News Bureau
New Delhi, 5th Dec: Parliament on Thursday approved the Central Excise (Amendment) Bill, 2025, with the Rajya Sabha returning it to the Lok Sabha, clearing the way for revised excise duties on cigarettes and other tobacco products following the expiry of the GST compensation cess.
Replying to the discussion in the Upper House, Union Finance Minister Nirmala Sitharaman clarified that the increased duties will be distributed among the states. “This is not a cess but excise duty. The amount will be redistributed to the States as per the Finance Commission’s recommendations,” she said.
Responding to concerns about the impact on tobacco farmers and beedi workers, the Minister stressed that the amendments will not adversely affect them. She noted that during the GST rollout, tobacco-related products were placed under the 28% slab with additional Compensation Cess to safeguard state revenues. The arrangement ensured steady income for the states, she said.
Sitharaman also highlighted the public health rationale behind the revised tax structure. India’s current tax incidence on cigarettes stands at around 53% of the retail price—far below the World Health Organisation’s benchmark of 75%. “When GST was introduced, even with the cess, taxes could not reach the WHO benchmark. As a result, affordability of tobacco products remained high, undermining public health goals,” she said.
She added that the revised duty structure has been calibrated to discourage consumption while maintaining fairness for stakeholders in the tobacco economy.
The Central Excise (Amendment) Bill, 2025, passed in the Lok Sabha on Wednesday, updates excise duties on tobacco products after the lifecycle of the GST compensation cess, aligning taxation with global health standards and strengthening revenue distribution to states.
