Tobacco Institute of India urges Centre to reconsider cigarette tax hike

The Tobacco Institute of India on Thursday said the sharp increase in excise duty on cigarettes would cause hardship and losses for millions of farmers, MSMEs, retailers and local value chains, while giving a major boost to the illicit industry and hurting national enterprises.

The body has requested the Centre to review the computations behind the new tax and reconsider the decision of imposing new duties on cigarettes.

The Finance Ministry has imposed an excise duty ⁠on cigarettes in a range of Rs 2,050 to Rs 8,500 per thousand sticks based on the length ‌of ‌the products, effective February 1. The move could increase prices of cigarettes for an estimated 100 million smokers in the world's most populous country.


Also Read: What cigarette tax hike means for 37 lakh ITC shareholders? Jefferies explains

In December, the Indian government approved a new law - the Central ‌Excise (Amendment) Bill ‍2025 - that replaces a ‍temporary levy on cigarettes and tobacco products.

The excise ‌duty would be imposed on cigarettes in addition to a 40% goods and services tax, the order said.

"It is well known that for every three legal cigarettes, one smuggled/illicit cigarette is sold in the country, and this high tax increase will further boost illegal and illicit activity depriving the National Exchequer besides promoting anti-social activity," said TII in its statement.

Also Read: Classic, Gold Flake or Marlboro: How your cigarette bills may get costlier from February 1

Citing Australia as an example, TII said that the high tax and stringent regulatory measures has had unintended consequences of an “exploding black market” with large criminalization of the trade in the country.

Shares of India's largest cigarette maker, ITC, suffered their steepest single-day decline in nearly six years on Thursday, with shares crashing 10% and wiping out over Rs 50,000 crore in market capitalisation after the Finance Ministry imposed a sharp new tax on cigarettes late on Wednesday.

The stock plummeted to a fresh 52-week low of Rs 362.7 during the session as investors scrambled to assess the damage from excise duty rates that could force price increases of at least 15%.

Godfrey Phillips India, which sells Marlboro cigarettes in the country, fared even worse, crashing as much as 19% in its steepest fall since November 2016.