Union Budget 2012-13: Pranab Mukherjee hikes excise duty on tobacco products

Cigarette smoking will now be even more injurious to your wallet. The finance minister — who used to strike a debonair pose with his pipes but has kicked the habit — on Friday announced structural changes in excise duties on tobacco products and an increase in rates, making the “unhealthy habit” also an expensive indulgence.

The Budget has increased excise duty on some cigarettes, handrolled bidis, pan masala, gutkha and chewing, unmanufactured and zardascented tobacco. The hike will make cigarettes above 65mm costlier with an ad valorem component of 10% added to existing specific rates. The ad valorem duty will be chargeable on 50% of the retail sale price declared on the pack.

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Analysts say manufacturers are likely to pass on a substantial part of the additional costs to consumers. An analyst at Angel Broking said, “It was anticipated and we expect the manufacturers to pass on the burden to customers.”

Leading tobacco companies indicated prices of cigarettes above 65mm would increase by 15-20 %. Godfrey Phillips chairman K K Modi says the rates will go up.