Central Excise Amendment Bill 2025 passed; Paves the way for higher tobacco taxes

Despite sharp criticism from opposition leaders, Parliament on Thursday, December 4, passed the Central Excise (Amendment) Bill, 2025, paving the way for imposing higher excise duty on tobacco and related products after the abolition of GST compensation cess.

Now after getting approval from both the Houses, Rajya Sabha has returned the bill to the Lok Sabha as part of the legislative process.

Once enacted into law, it will allow the government to increase the rate of central excise duty on tobacco and related products after the abolition of GST compensation cess.

Currently, tobacco and related products attract 28% Goods and Services Tax (GST) and cess at various rates.

The Bill proposes 60-70% excise duty on unmanufactured tobacco, while 25% excise duty is proposed on cigars and cigars. ₹5,000 per 1,000 sticks.

It is also proposed that there should be a limit on the tax on cigarettes. A tax of Rs 2,700-11,000 will be levied per 1,000 sticks depending on the length and filter and chewing tobacco. 100 per kg.

Opposition leaders criticized the real intention behind the bill. “The real objective of the bill appears to be revenue generation, not health protection,” opposition party Congress posted on Twitter.

Congress MP JB Mather said the bill “exemplifies every flaw in the implementation of the GST regime by the central government,” adding that it only provides “imaginary protection” that has no real impact on the health and welfare of people.

Finance Minister Nirmala Sitharaman assured the House that tobacco products will still be taxed at 40% under the demerit category in the GST regime.

He said farmers in Andhra Pradesh, Karnataka, Bihar, West Bengal and Maharashtra are being encouraged to quit tobacco and grow other cash crops.

“More than one lakh acres of land in these states is being shifted from tobacco cultivation to other crops,” he said.