The Union government has announced a significant increase in excise duties on cigarettes and other tobacco products, a move that will directly lead to higher retail prices for consumers across India. The new rates come into effect from February 1, 2024, as per a recent notification from the Central Board of Indirect Taxes and Customs (CBIC).
Details of the Excise Duty Hike
The key change is a 16% increase in the National Calamity Contingent Duty (NCCD) on cigarettes. This duty is levied in addition to the basic Goods and Services Tax (GST) and other applicable charges. The revised NCCD rates now stand at:
- Rs. 4,170 per thousand for cigarettes exceeding 85 mm in length.
- Rs. 2,752 per thousand for cigarettes between 70 mm and 85 mm in length.
- Rs. 2,125 per thousand for cigarettes of length not exceeding 70 mm.
This is not an isolated adjustment. The government has also raised the NCCD on other tobacco products. The duty on chewing tobacco (including gutkha) has been increased from 12% to 22%. Similarly, the NCCD on filter khaini has been hiked from 12% to 22%.
Impact on Retail Prices and Market
The immediate and most visible consequence of this excise duty hike will be a rise in the maximum retail price (MRP) of all affected products. Manufacturers will pass on the increased tax burden to the end consumer. This means smokers and users of gutkha, chewing tobacco, and filter khaini will have to pay more for their purchases from the start of next month.
This move is part of the government's broader fiscal and public health strategy. Higher taxes on tobacco are a globally recognized method to discourage consumption, especially among younger demographics and price-sensitive users. The increased revenue from these duties will also contribute to the national exchequer.
Context and Industry Implications
The decision was anticipated by market analysts, as the government often reviews excise duties in the lead-up to the Union Budget. While the full Budget for the fiscal year 2024-25 will be presented in July, this interim adjustment sets the tone for the government's revenue and health policy priorities.
The tobacco industry, which includes major cigarette manufacturers and a vast unorganized sector for chewing tobacco, is likely to see a shift in demand dynamics. Price hikes could potentially lead to a contraction in legal sales volumes, though the overall impact on public health outcomes depends on several factors, including enforcement against illicit trade.
For the common consumer, the message is clear: preparing for a heavier hit on the wallet for tobacco products starting February 1st. Retailers and stockists are expected to adjust their pricing in line with the new tax structure, making a pack of cigarettes or a pouch of gutkha more expensive overnight.
