The Central Excise (Amendment) Act, 2025
Kartavya Desk Staff
Source: TH
Subject: Government Bills and Acts
Context: The Centre has notified the Central Excise (Amendment) Act, 2025 and related tax changes on tobacco products, effective February 1, 2026.
• The move ends the GST compensation cess, revises excise duties, and aims to raise tobacco prices in line with public health and fiscal objectives.
About The Central Excise (Amendment) Act, 2025:
What it is?
• The Central Excise (Amendment) Act, 2025 amends the Central Excise Act, 1944 to revise excise duties on tobacco and tobacco-related products, which remain outside the full GST framework.
Key features of the Act:
• Revision of excise duty rates: Updates central excise duties on tobacco to maintain and enhance the overall tax burden after the end of GST compensation cess.
• Higher duties on tobacco products: Unmanufactured tobacco: 64% → 70% Chewing tobacco: 25% → 100% Hookah/gudaku tobacco: 25% → 40% Smoking mixtures for pipes/cigarettes: 60% → 325% Cigarettes: From ₹200–₹735 to ₹2,700–₹11,000 per thousand sticks
• Unmanufactured tobacco: 64% → 70%
• Chewing tobacco: 25% → 100%
• Hookah/gudaku tobacco: 25% → 40%
• Smoking mixtures for pipes/cigarettes: 60% → 325%
• Cigarettes: From ₹200–₹735 to ₹2,700–₹11,000 per thousand sticks
• Public health objective: Aligns with global guidance to ensure real cigarette prices rise faster than incomes.
• GST rate restructuring: Beedis: Moved to 18% GST All other tobacco products: Moved to 40% GST
• Beedis: Moved to 18% GST
• All other tobacco products: Moved to 40% GST
• New valuation mechanism: GST value based on retail sale price declared on the package for chewing tobacco, gutkha, khaini, jarda, etc.
About GST Compensation Cess:
What it is?
• The GST compensation cess is an additional levy imposed on select goods to compensate States for revenue losses arising from the implementation of GST.
Started in: July 2017, alongside the rollout of GST, initially for a five-year period (till June 2022).
Key features:
• Extended till March 31, 2026 due to COVID-19–related revenue shortfalls.
• Used primarily to repay about ₹2.7 lakh crore borrowed by the Centre to compensate States.
• Levied in addition to GST and, for tobacco, central excise duty.
• Being phased out completely from February 1, 2026, including on tobacco products.
Items covered: Tobacco and tobacco products, Pan masala, Aerated and caffeinated drinks, Luxury cars, Motorcycles above 350 cc and Specified firearms (revolvers, pistols, etc.)