New Delhi [India], December 3 (ANI): Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill, 2025, aimed at increasing excise duties on tobacco products and their manufacturing following a discussion.
Finance Minister Nirmala Sitharaman clarified that the Bill is not a new law or an additional tax. “This is not a cess. Excise duty existed before GST. The compensation cess is reverting back to the Centre to be collected as excise duty, which will be redistributed to the States at the 41% allocated,” she said, addressing concerns raised by members. The revenue collected under the revised duties will go to the divisible pool and be shared with states.
Citing a WHO report, the minister noted that India had not revised specific cess rates even as average retail prices of cigarettes rose at half the pace of nominal income growth. She highlighted that many countries revise tobacco taxes annually, often linking them to inflation. “Even in India, prior to GST, tobacco rates were increased annually, primarily due to health-related concerns, as higher prices or taxes act as a deterrent to prevent people from developing the habit,” she said.
Sitharaman added that the government’s initiatives have led to a shift in tobacco cultivation, with over 1.12 lakh acres (45,323 hectares) converted to alternative crops such as sugarcane, groundnut, oil palm, cotton, chilli, maize, onion, pulses, and turmeric between 2018 and 2021–22.
The Finance Minister had introduced two bills in Lok Sabha on the first day of the Winter session: the Central Excise (Amendment) Bill, 2025, and the Health Security and National Security Cess Bill, 2025. (ANI)
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