In a significant policy development, Parliament has officially passed the Central Excise (Amendment) Bill, 2025, after the Rajya Sabha approved and returned it to the Lok Sabha. The bill marks one of the most sweeping revisions to tobacco taxation in recent years, focusing not only on revenue but also on public health and long-standing concerns around affordability of harmful products.
Why the Amendment Was Needed
The amendment updates the Central Excise Act, 1944 to allow the government to raise duties on cigarettes, cigars, hookah tobacco, chewing tobacco, zarda, scented tobacco and tobacco substitutes.
One of the key motivations behind the bill is ensuring that taxation remains effective after the sunset of the previous cess structure. Without a revision, the government would lack fiscal room to maintain the overall tax burden necessary to discourage consumption.
Massive Revision of Tobacco Duty Structure
The updated duty slabs reflect a dramatic shift compared to the older system. Previously, the excise duty on cigarettes ranged from 200 to 735 rupees per thousand sticks. The new structure pushes this range to between 2,700 and 11,000 rupees per thousand cigarettes.
Other product categories also see steep increases:
- Chewing tobacco duty rising from 25 percent to 100 percent
- Hookah tobacco duty increasing from 25 percent to 40 percent
- Pipe and cigarette smoking mixture duty jumping from 60 percent to 325 percent
The government’s stated objective is clear: tobacco should not remain an easily affordable product in the market, particularly when its health impact is well-documented.
Government’s Stand: Public Health First, Revenue Sharing Intact
Responding to concerns in the Rajya Sabha, Finance Minister Nirmala Sitharaman clarified that the revised taxes will be shared with states, emphasizing that this is excise duty and not a new cess.
She also addressed apprehensions regarding farmers and beedi workers. According to the Minister, multiple schemes — especially those targeting crop diversification — are already in place to support farmers interested in shifting out of tobacco cultivation. Between 2017-18 and 2021-22, more than 1.12 lakh acres have been moved away from tobacco farming.
Additionally, nearly 50 lakh beedi workers are registered across the country, and several welfare programmes continue to operate through national labour organisations.
Aligning India With Global Standards
India’s current tax incidence on cigarettes stands at nearly 53 percent of the retail price, significantly lower than the World Health Organization’s recommended benchmark of 75 percent.
The Minister noted that even after the introduction of GST, India’s combined tax burden on tobacco products did not consistently meet global standards, making many products remain relatively affordable. This bill seeks to correct that gap and push tobacco consumption farther out of reach.
Debate in Parliament: Concern, Support and Calls for Review
The discussion saw a wide range of viewpoints:
- Congress MP Pramod Tiwari raised worries about the effect on tobacco farmers and argued for sending the bill to a parliamentary committee.
- TMC’s Sagarika Ghose stated that taxation alone will not reduce consumption unless accompanied by strong health awareness campaigns and tighter regulation on pan masala advertising.
- AAP MP Sandeep Kumar Pathak questioned whether excessive taxes are the right tool to curb addiction.
- AIADMK’s M Thambidurai supported the bill, calling it a timely reform that protects public health.
The debate also saw political exchanges, with the Finance Minister pushing back against claims from Trinamool Congress members on issues unrelated to the bill.
A Policy Shift with Far-Reaching Impact
The passage of the Central Excise (Amendment) Bill, 2025 signals a deliberate move towards stronger public health regulation backed by fiscal policy. Whether it significantly impacts tobacco consumption patterns will be seen over time, but the government has made its stance unmistakably clear: affordability should not enable addiction.
After the detailed discussion, the House adjourned, marking the close of a critical legislative day.
