Tobacco and pan masala products are set to get costlier from February 1, with the Centre officially notifying a new tax framework that replaces the existing compensation cess on so-called sin goods. The government has introduced an additional excise duty on tobacco products and a Health and National Security Cess on pan masala, which will apply over and above the current GST rates.
Under the Goods and Services Tax regime, pan masala, cigarettes, tobacco and related products will continue to attract a 40% GST rate, while biris will remain under the 18% slab. These GST slabs will stay unchanged, but the newly announced levies will be charged separately.
The Finance Ministry has also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, laying out a new mechanism to assess production capacity and ensure duty collection from manufacturers of chewing tobacco and allied products.
This major overhaul follows Parliament’s approval in December of two Bills that paved the way for introducing a dedicated cess on pan masala manufacturing and an additional excise duty on tobacco items.
With the latest notification, the government has confirmed that the new tax structure will come into force on February 1. At the same time, the GST compensation cess—currently imposed at varying rates across tobacco and pan masala products—will be discontinued from that date.