Budget 2023 - Impact of GST on Cigarettes & Tobacco Products

Tobacco is classified as sin goods; thus, various taxes such as Central Excise duty, National Calamity Contingent Duty (NCCD), GST, and compensation cess are levied on it. The WHO has recommended at least a 75% tax on all tobacco products. However, there isn’t enough tax levied on such products in India.Under the budget 2023, it states that GST on tobacco products and cigarettes will be 28%, which is the highest GST rate in India. In addition to compensation cess levied under the GST law as well as duties imposed under the Central Excise law. It states that all tobacco products, including paan masala, cigars, cigarillos, hookah, and other similar products.While our finance minister, Nirmala Sitharaman, said the last revision of National Calamity Contingent Duty (NCCD) on cigarettes was done almost 3 years ago, and it should be revised and raised upwards of 16%. In the last revision of the NCCD, taxes on cigarettes was raised ranging from 212% to 388% depending on the sizes of the cigarette sticks. This is possible as NCCD is a surcharge, meaning it is imposed in addition and independently to excise duty and GST.

What tobacco products have remained untouched in this new policy?

Smokeless cigarettes, chewing tobacco and bidis have remained untouched in the budget 2023 with no additional cess levied. Even though they are already subject to 28% of GST.

Excise, NCCD and Cess on tobacco products

The pointers below will list the NCCD, compensation cess and excise duty on tobacco charged on the manufacture of cigarettes and tobacco products of different variations under budget 2023.

Excise duty on;

• Cigarettes up to 65mm in length - 5 rupees per one thousand sticks
• Cigarettes between 65mm and 70mm - 5 rupees per one thousand sticks
• Filter cigarettes up to 65mm in length** - 5 rupees per one thousand sticks
• Filter cigarettes between 65mm and 70mm** - 5 rupees per one thousand sticks
• Filter cigarettes between 70mm and 75mm** - 5 rupees per one thousand sticks
• Other cigarettes containing tobacco - 10 rupees per one thousand sticks
• Cigarettes of tobacco substitutes - 5 rupees per one thousand sticks

NCCD on;

• Cigarettes up to 65mm in length - 230 rupees per one thousand sticks
• Cigarettes between 65mm and 70mm - 290 rupees per one thousand sticks
• Filter cigarettes up to 65mm in length** - 510 rupees per one thousand sticks
• Filter cigarettes between 65mm and 70mm** - 510 rupees per one thousand sticks
• Filter cigarettes between 70mm and 75mm** - 630 rupees per one thousand sticks
• Other cigarettes containing tobacco - 850 rupees per one thousand sticks
• Cigarettes of tobacco substitutes - 910 rupees per one thousand sticks

Compensation cess

• Cigarettes up to 65mm in length - 5% + Rs.2076
• Cigarettes between 65mm and 70mm - 5% + Rs.3668*
• Filter cigarettes up to 65mm in length** - 5% + Rs.2076
• Filter cigarettes between 65mm and 70mm** - 5% + Rs.2747
• Filter cigarettes between 70mm and 75mm** - 5% + Rs.3668
• Other cigarettes containing tobacco - 36% + Rs.4170
• Cigarettes of tobacco substitutes - ₹4006

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