The Indian Parliament has given its final nod to a significant legislative change that will increase the tax burden on tobacco products. The Central Excise Amendment Bill, 2025, was passed, paving the way for higher excise duties on cigarettes, cigars, and other tobacco items.
Key Provisions of the Amended Bill
The bill successfully cleared both Houses of Parliament, receiving approval from the Lok Sabha on February 5 and subsequently from the Rajya Sabha. This legislative action formally implements the excise duty hikes that were initially proposed by Finance Minister Nirmala Sitharaman during her presentation of the Union Budget for the fiscal year 2025-26.
The core amendment modifies the First Schedule of the Central Excise Act of 1944. This schedule contains the tariff rates for various excisable goods. The revision specifically targets the entries related to tobacco and its manufactured products, effectively raising the applicable duties.
Budget Proposal Turned into Law
The journey of this tax increase began with the Union Budget announcement. Finance Minister Nirmala Sitharaman proposed the hike as part of the government's revenue-raising measures. The passage of the Central Excise Amendment Bill, 2025, transforms that proposal into binding law.
The legislative process saw the bill introduced and passed in the Lok Sabha on February 5. It then moved to the upper house, the Rajya Sabha, where it was also passed, completing the parliamentary approval process. This swift passage underscores the government's priority on this fiscal measure.
Implications and Expected Outcomes
The primary objective behind this duty hike is twofold. Firstly, it aims to generate additional revenue for the government's coffers. Taxes on sin goods like tobacco are a predictable and significant source of income for the exchequer.
Secondly, and perhaps more importantly from a public health perspective, the increase is a dissuasive measure intended to curb tobacco consumption. By making tobacco products more expensive, the government hopes to deter purchase, especially among younger demographics and price-sensitive consumers. This aligns with broader national health goals to reduce the incidence of tobacco-related diseases.
The amendment will impact a wide range of tobacco products, including:
- Cigarettes
- Cigars
- Cheroots
- Other manufactured tobacco items
Industry stakeholders, including manufacturers and retailers, will need to adjust to the new tax regime. The hike is likely to lead to an increase in the retail price of these products, passing the financial burden onto the end consumer. The move has been welcomed by public health advocates but may face criticism from certain business quarters.
With the President's assent, which is the final step, the Central Excise Amendment Bill, 2025 will become an Act, and the revised, higher excise duty rates will come into immediate effect across India.
