Tobacco Institute of India Appeals to Centre Over Cigarette Tax Hike

The Tobacco Institute of India has requested the central government to reconsider the recent increase in excise duties on cigarettes, which comes into effect from February 1.

The body warns that higher taxes may adversely affect farmers, small businesses, and retailers, while potentially encouraging illicit trade. 

The move has already influenced stock market reactions in the tobacco sector.

Concerns Raised by the Tobacco Institute

The industry body highlighted that the new excise duty, ranging from ₹2,050 to ₹8,500 per 1,000 sticks based on cigarette length, could create financial strain for millions involved in production and retail.

It argued that such a steep increase might incentivise illegal cigarette sales, reducing tax revenue and impacting the formal market.

Government Tax Measures

The Finance Ministry recently passed the Central Excise (Amendment) Bill 2025, which replaces the temporary levy on tobacco products. The new excise duty is to be levied in addition to the existing 40% Goods and Services Tax. The policy aims to standardise taxation across cigarette types while increasing government revenue from the sector.

International Comparison and Market Effects

Citing international experience, the Tobacco Institute noted that high excise duties in other countries, such as Australia, have sometimes led to the growth of black markets, as per The Economic Times report.

In India, the institute anticipates similar outcomes if the new duties are implemented without adjustments.

Impact on Tobacco Company Stocks

The new tax measures have already affected listed tobacco companies. ITC shares fell approximately 10%, reaching a 52-week low of ₹362.7, while Godfrey Phillips India declined by nearly 19%. 

Investors are assessing the potential for price increases and the broader impact on sales and margins.

Read More: ITC, Godfrey Phillips and VST Industries Shares Extend Fall on Jan 2, 2026, After Excise Duty Increase.

Conclusion

The Tobacco Institute’s appeal reflects industry concerns over the economic and operational impact of higher cigarette taxes. While the government seeks to increase revenue, the sector may face challenges including potential growth in illicit trade and pressure on stock performance. Policymakers and market participants will be closely watching developments as the February 1 implementation date approaches.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.