• Source:JND

Higher Taxes on Tobacco Products: The Central Government announced it would levy higher taxes on tobacco and pan masala products. Following the development, Shares of tobacco stocks, including ITC and Godfrey Phillips, plunged up to 18 per cent during the intraday trade on January 1.

The finance ministry, on the late evening of December 31 2025, notified a new excise duty and cess to replace the compensation cess on such products under GST.

The new duties would be effective from February 1 and will be charged over and above the applicable GST rates.

Tobacco Stocks Fall

ITC share price nosedived by over 10 per cent. At around 12:16 PM, the ITC share price was trading at Rs 362.70, down 10 per cent, while Godfrey Phillips' share price plummeted 18 per cent to Rs 2,263.80 on the NSE.

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New Taxes Will Be Additional To GST

The new taxes on tobacco and pan masala will be in addition to the GST rate and will replace the compensation cess currently levied on such harmful goods.

How much tax will be levied on tobacco products?

According to a government notification, pan masala, cigarettes, tobacco, and similar products will be subject to a 40 per cent GST starting February 1, while bidis will be subject to an 18 per cent Goods and Services Tax (GST).

53 per cent Tax on Tobacco Products

Total taxes on cigarettes in India currently account for approximately 53 per cent of retail prices, which is still below the World Health Organisation's (WHO) benchmark of 75 per cent. which aims to reduce consumption. The current taxes include a 28 per cent Goods and Services Tax and an additional value-based levy based on cigarette size.

Parliament Passes The Bill Earlier

Parliament passed two bills in December, allowing for the imposition of a new health and national security cess on the manufacture of pan masala and an excise duty on tobacco.

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