Lok Sabha Passes Central Excise Amendment Bill 2025: Higher Tobacco Duties Imminent
The Lok Sabha has passed the Central Excise Amendment Bill 2025, paving the way for significantly higher excise duties on tobacco products once the GST compensation cess concludes. This move will see revised tax rates for unmanufactured tobacco, cigars, cigarettes, and chewing tobacco, providing the government fiscal flexibility as the compensation cess loan is repaid.
The Lok Sabha, during the winter session of Parliament, has successfully passed the Central Excise Amendment Bill 2025. This significant legislative action will enable the central government to impose higher excise duties on various tobacco products once the Goods and Services Tax (GST) compensation cess is discontinued.
Cleared by a voice vote, the bill grants the Centre greater fiscal autonomy to adjust duty rates across all categories of tobacco. This change will come into effect after the cessation of the compensation cess, which is currently levied alongside the standard 28% GST.
Under the proposed new structure, unmanufactured tobacco will face an excise duty of 60% to 70%. Cigars and cheroots will be subject to a 25% duty or a fixed rate of Rs 5,000 per thousand sticks, whichever amount is higher.
Cigarettes will see a broad tax band, ranging from Rs 2,700 to Rs 11,000 per thousand sticks, dependent on their size and filter type. Additionally, chewing tobacco will incur a tax of Rs 100 per kilogram.
The bill also includes provisions to replace the existing tariff rate table under the Central Excise Act, formalising the new excise regime post-cess phase-out. The Finance Minister noted that the timing of this amendment is linked to the near-complete repayment of the compensation cess loan, which currently stands at Rs 2.69 lakh crore, allowing excise authority to revert to the central government.