Central Excise (Amendment) Bill, 2025
The Lok Sabha passed the Central Excise (Amendment) Bill, 2025, which aims to levy higher excise duties on tobacco and related products after the end of the GST compensation cess.
Key Features of the Bill
- The Bill was passed by a voice vote in the Lok Sabha on December 3, 2025.
- The enactment will provide fiscal space to increase central excise duty rates on tobacco products.
- Current taxation includes a 28% GST and a varied rate of cess on tobacco products.
- The excise duty rates proposed under the Bill include:
- 60-70% on unmanufactured tobacco.
- 25% or ₹5,000 per 1,000 sticks on cigars and cheroots, whichever is higher.
- ₹2,700-₹11,000 per 1,000 sticks on cigarettes, depending on length and filter.
- ₹100 per kg on chewing tobacco.
Background and Rationale
The Bill seeks to update the tariff rates for tobacco products in Section IV of the Fourth Schedule to the Central Excise Act, 1944.
- When GST was introduced on July 1, 2017, central excise duties on tobacco were reduced to accommodate the compensation cess.
- The GST compensation cess, initially set for five years until June 30, 2022, was extended until March 31, 2026.
- Finance Minister Nirmala Sitharaman indicated that the loans under the compensation cess account would be fully paid in a few weeks.
- The compensation cess helped cover the ₹2.69 lakh crore loan for GST revenue loss during the COVID-19 pandemic.
