Lok Sabha passes Bill aimed at raising excise duty on tobacco products

The Central Excise (Amendment) Bill, 2025 seeks to revise excise duties on tobacco and related products after the expiry of the GST compensation cess.

"This is not a new law. This is not an additional tax. This is not some thing that Centre is taking away," Finance Minister Nirmala Sitharaman said in her reply to the discussion on the Bill.

She categorically said excise duty that would be levied and not cess, clearing apprehensions of some members. "This is not a cess," she said.

The minister said that the revenue collected will go to the divisible pool, and will be redistributed again (at the 41%) with the States.

"Many members here made the comment that this is a cess. Excise is not a cess. Excise duty existed before GST. Compensation cess is reverting back to the Centre to be collected as Excise duty, which will be redistributed to the States at the 41% allocated"

Citing WHO report, she said India did not revise specific cess rates even as the average retail prices of cigarettes rose at half the pace of nominal income growth.

Many countries revise tobacco taxes annually, while many link it with inflation, she noted.

"Even in India, prior to GST, tobacco rates were increased annually. This was primarily due to health-related concerns, as higher prices or taxes were intended to act as a deterrent so that people would not get into the habit," she said.

The government is bringing back the excise duty which existed priority to the GST system, she said.

The minister said because of various initiatives taken by the government, acreage under tobacco cultivation of over 1.12 lakh acres (45,323 hectare) moved to other crops between 2018 to 2021-22. It has shifted to sugarcane, groundnut, oil palm, cotton, chilli, maize, onion, pulses, and turmeric, she said.

Sitharaman introduced two bills in Lok Sabha on Monday, the first day of the Winter session of Parliament. She introduced the Central Excise (Amendment) Bill, 2025, and Health Security se National Security Cess Bill, 2025, in Lok Sabha. (ANI)