How Much Cigarettes, Beedis & Pan Masala Will Cost From February 1, 2026 as New GST, Excise & Health Cess Take Effect
From February 1, 2026, smokers and users of chewing tobacco products across India are set to face a noticeable rise in expenses as the Union government rolls out a major overhaul of tobacco taxation. The revised framework introduces higher GST slabs, fresh excise duties on cigarettes, and a newly created Health and National Security Cess on pan masala, significantly increasing the overall tax burden on so-called “sin goods”.
The move marks one of the most aggressive tax resets on tobacco products in recent years, with policymakers citing public health priorities and long-term revenue stability as the key drivers.
What’s Changing From February 1, 2026?
Under the new regime, tobacco products will now be taxed through multiple parallel layers instead of the earlier GST-plus-compensation cess model. These include:
- Higher GST rates
- Reintroduced excise duty on cigarettes
- A new Health & National Security Cess on pan masala
Together, these measures are expected to push retail prices into double-digit growth territory, impacting both consumers and listed tobacco companies.
Revised GST Rates Effective February 1, 2026
As per the latest notification:
| Product Category | New GST Rate |
|---|---|
| Cigarettes | 40% GST |
| Pan Masala & Chewing Tobacco | 40% GST |
| Beedis (Biris) | 18% GST |
This represents a significant increase for cigarettes and pan masala, which were earlier taxed under a different structure combining GST and compensation cess.
Beedis, which are widely consumed by lower-income groups, remain in a lower slab but will still see moderate price pressure due to cumulative taxation effects.
Fresh Excise Duty on Cigarettes After Years
In a major policy shift, the Centre has reintroduced excise duty on cigarettes, ending a long-standing freeze on tobacco excise.
The new excise duty structure is linked to cigarette length and filter type, with rates ranging from:
- ₹2,050 per 1,000 sticks (short, non-filter cigarettes)
- Up to ₹8,500 per 1,000 sticks (long, king-size or premium variants)
This means all cigarette categories—budget to premium—will become costlier, as manufacturers are unlikely to absorb the full burden.
Health & National Security Cess on Pan Masala
Pan masala manufacturers will now have to pay a Health and National Security Cess, a newly introduced levy aimed at funding public health initiatives and national security needs.
Key Features of the New Cess:
- Capacity-based taxation instead of retail price-based
- Linked to production machinery and installed capacity
- Higher compliance and reporting requirements for manufacturers
Industry experts believe this mechanism could reshape pricing strategies, reduce under-reporting, and push smaller manufacturers out of the market.
How Much Will Cigarettes Cost After February 1, 2026?
Market estimates suggest cigarette prices could rise between 15% and 28% depending on brand, size, and region.
Example:
- A cigarette currently priced at ₹18 per stick
- Could cost ₹21–₹22 per stick post-tax revision
Large players such as ITC and other organized manufacturers are expected to roll out phased price hikes, balancing volume protection with margin stability.
Pan Masala Prices Also Set to Rise
While exact price increases are harder to estimate for pan masala, analysts expect a sharp upward revision, especially in popular sachet-based products.
The final retail impact will depend on:
- How manufacturers adjust production
- Whether companies downscale capacity to manage cess exposure
- State-level enforcement intensity
Why the Government Made These Changes
The Centre has positioned the tax overhaul as part of a broader strategy to:
- Discourage tobacco consumption
- Reduce long-term public health costs
- Create dedicated funding streams for health and security
- Improve transparency in tobacco manufacturing
Public health advocates have welcomed the move, while industry stakeholders warn of short-term volume disruptions.
What This Means for Consumers and Markets
- Consumers: Higher out-of-pocket spending on cigarettes, beedis, and pan masala
- Manufacturers: Margin pressure, pricing recalibration, and compliance challenges
- Markets: Possible volatility in tobacco stocks amid volume-growth concerns
Bottom Line
From February 1, 2026, tobacco products in India will no longer be cheap indulgences. With 40% GST, revived excise duties, and a new health cess, cigarettes and pan masala are entering a much heavier tax regime, signaling a clear policy intent to curb consumption while boosting fiscal and health-related revenues.
