Following the implementation of a new excise duty regime, cigarette prices across India have witnessed a substantial increase, with a standard pack of 10 sticks now costing at least Rs 22 to Rs 25 more than previous rates. This significant price hike comes after the government's decision to raise taxes on cigarettes for the first time in nearly seven years, a move that brings India's tobacco taxation framework closer to global public health standards.
New Taxation Structure Replaces GST Compensation Cess
The newly approved levies, which received parliamentary approval in December, will effectively replace the existing GST compensation cess framework that has been operational since the rollout of the Goods and Services Tax in July 2017. From February 2026 onward, cigarettes and tobacco products will attract additional excise duty and cess over and above the highest 40% GST slab, marking a departure from the current structure of 28% GST plus compensation cess.
Price Increases Vary by Cigarette Type and Length
The extent of price increases varies considerably depending on the length and type of cigarette. According to industry distributors, premium cigarettes measuring 76 mm in length will now cost between Rs 50 and Rs 55 more per pack of 10 sticks, with specific amounts varying by brand. While manufacturers have yet to issue formal revised MRP declarations, distributors have already begun billing existing stock to retailers with the standard 40% GST rate applied.
With wholesale markets closed on Sunday, distributors anticipate that fresh stock featuring updated MRPs will become available starting Monday. As reported by news agency PTI, a packet of Wills Navy Cut (76 mm), previously priced at Rs 95 for 10 sticks, is expected to retail for approximately Rs 120 per pack.
Specific Price Adjustments Across Categories
Cigarettes measuring 84 mm in length—including popular brands such as Gold Flake Kings and Lights, Wills Classic, and Wills Classic Milds—currently priced at Rs 170 per pack of 10 sticks, are projected to cost between Rs 220 and Rs 225 per pack. Similarly, slim cigarette varieties like Classic Connect (97 mm), previously priced at Rs 300 for a pack of 20 sticks, are expected to carry an MRP of around Rs 350 following the tax adjustments.
Industry Concerns About Illicit Trade
Despite the government's public health objectives, distributors have expressed serious concerns that these substantial price increases could inadvertently stimulate increased smuggling activities and the proliferation of counterfeit tobacco products. According to representatives from the All India Cigarette and Tobacco Distributors Federation (AICPDF), approximately 8,000 to 9,000 stockists operate across the country, distributing cigarettes and tobacco products through traditional retail channels.
"Some companies have already placed their stocks on hold. They will begin releasing inventory after billing under the new tax structure," explained a stockist in comments to PTI. The distributor further emphasized the broader implications for small retailers, stating, "Tobacco products represent one of the few remaining categories where small shopkeepers maintain relevance. If this segment transitions into illicit networks, what opportunities remain for honest retailers? This issue extends beyond taxation—it concerns their very survival."
Legislative Changes and Future Implications
The Central Excise Act has undergone amendments to impose a per-stick excise duty on cigarettes, with rates differentiated according to length specifications. This structural change represents the most significant overhaul of tobacco taxation in India since the implementation of GST, potentially influencing consumer behavior, public health outcomes, and market dynamics in the coming months.
