New GST on Cigarettes: Complete Tax Structure
The GST rate on cigarettes in India is among the highest across all goods and services. This is done to both boost government revenue and discourage the use of tobacco products due to serious health risks. Whether you’re a consumer, retailer, or manufacturer, understanding the GST on cigarettes is crucial for staying compliant and informed.
New GST Rate on Cigarettes in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for cigarettes (no compensation cess).
| HSN Code | Description | New GST Rate | Compensation Cess |
|---|---|---|---|
| 2402 2010 | Cigarettes containing tobacco | 40% | — |
| 2402 9010 | Cigarettes of tobacco substitutes | 40% | — |
What is the Old GST Rate on Cigarettes in India?
(Old GST Rates – Applicable Until 21st September)
Under the GST regime, cigarettes attract the highest GST slab of 28%. However, that’s not all. Cigarettes also carry a Compensation Cess, which varies depending on the length and whether the cigarette has a filter.
GST and Compensation Cess Table
| HSN Code | Description | GST Rate | Compensation Cess |
|---|---|---|---|
| 2402 2010 | Cigarettes containing tobacco | 28% | Depends on length and filter |
| 2402 9010 | Cigarettes of tobacco substitutes | 28% | Depends on type |
Compensation Cess (Illustrative Rates)
| Type of Cigarette | Compensation Cess |
|---|---|
| Up to 65 mm (without filter) | ₹4.17/unit + 5% of retail sale price |
| Up to 65 mm (with filter) | ₹2.76/unit + 5% of retail sale price |
| More than 65 mm up to 70 mm | ₹4.17/unit + 12% of retail sale price |
| More than 70 mm up to 75 mm | ₹5.74/unit + 12% of retail sale price |
| More than 75 mm | ₹8.72/unit + 36% of retail sale price |
Note: These cess rates are over and above the 28% GST and are revised by the GST Council as needed.
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Why Is the Tax So High?
Cigarettes are taxed heavily under Goods and Services Tax (GST) for the following reasons:
- To discourage tobacco usage and reduce related health issues
- To generate revenue for public healthcare programs
- To align India’s policies with WHO’s anti-tobacco guidelines
Impact on Businesses
Businesses involved in cigarette manufacturing or retail must:
- Register under GST
- Charge both GST and cess on invoices
- File monthly returns
- Maintain clear records for GST audits
While the gst on cigarettes provides revenue, it also demands strict compliance from businesses in the sector.
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Input Tax Credit (ITC) and Cess
Companies can claim Input Tax Credit (ITC) on goods and services used in the production or distribution of cigarettes. However, it’s important to note:
- ITC can be claimed on the 28% GST paid on inputs
- Compensation Cess paid on inputs cannot be adjusted — it must be paid in full at each level
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Conclusion
To sum up, the gst rate on cigarettes in India includes both 28% GST and an additional compensation cess that can significantly increase the final price. The aim is to discourage smoking and offset the burden of healthcare costs caused by tobacco-related diseases.
Understanding the gst on cigarettes is key for businesses, retailers, and even consumers who want to stay aware of how tax policies affect pricing. With multiple tax components involved, careful record-keeping and compliance are essential.
As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience.
Frequently Asked Questions
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What is the GST rate on cigarettes in India?The GST rate is 28%, plus a compensation cess that depends on the size and type of cigarette.
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Is GST different for hand-rolled bidis or loose tobacco?Yes. Bidis and other tobacco products are taxed under different HSN codes and typically do not carry the same cess rates as cigarettes.
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Can retailers claim ITC on cigarettes?Yes, retailers can claim ITC on the GST paid on purchases, but not on the compensation cess.
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Are e-cigarettes taxed under GST?E-cigarettes are currently banned in India. If allowed in the future, GST rates will be notified accordingly.