New GST on Tobacco Products in India: Cigarettes, Chewing Tobacco & More
Tobacco is one of the most heavily taxed products in India. Under the Goods and Services Tax (GST) regime, tobacco products like cigarettes, chewing tobacco, and gutkha are subject to both GST and an additional compensation cess. This dual-tax approach is designed to discourage tobacco consumption while generating revenue for public welfare.
In this blog, we’ll explain the GST rates on different types of tobacco products, applicable HSN codes, cess rates, and implications for consumers and businesses.
New GST Rate on Tobacco Products in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for tobacco and related products. Compensation cess continues to apply on most categories.
| Tobacco Product | New GST Rate | Compensation Cess | Total Tax Burden |
|---|---|---|---|
| Cigarettes (length-based) | 40% | ₹1.05 – ₹4.17 per stick or 5% – 290% (ad valorem) | Very High |
| Chewing Tobacco (zarda, gutkha) | 40% | 142% of value | Extremely High |
| Cigars & Cigarillos | 40% | 21% or ₹4,170 per 1,000 pcs | High |
| Smoking Tobacco (loose) | 40% | 290% of value | Very High |
| Filtered / Unfiltered Bidis | 40% | No cess (currently) | Medium |
Old GST Rate on Tobacco Products
(Old GST Rates – Applicable Until 21st September)
The gst rate on tobacco products is fixed at a base rate of 28%, which is the highest GST slab. On top of that, different types of tobacco attract additional compensation cess, which makes the total tax burden very high.
| Tobacco Product | GST Rate | Compensation Cess | Total Tax Burden |
|---|---|---|---|
| Cigarettes (length-based) | 28% | ₹1.05 – ₹4.17 per stick or 5% – 290% (ad valorem) | Very High |
| Chewing Tobacco (zarda, gutkha) | 28% | 142% of value | Extremely High |
| Cigars & Cigarillos | 28% | 21% or ₹4,170 per 1,000 pcs | High |
| Smoking Tobacco (loose) | 28% | 290% of value | Very High |
| Filtered / Unfiltered Bidis | 28% | No cess (currently) | Medium |
These rates place tobacco gst rate among the highest-taxed categories in the country
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HSN Codes for Tobacco Products
Each tobacco product is identified under the HSN code 2402 or 2403 depending on its form.
| Product Type | HSN Code | GST Rate | Cess Type |
|---|---|---|---|
| Cigarettes (all types) | 2402 | 28% | Specific/ad valorem |
| Cigar & Cigarillos | 2402 | 28% | ₹4,170 per 1,000 units |
| Chewing Tobacco / Gutkha | 2403 | 28% | 142% |
| Smoking tobacco | 2403 | 28% | 290% |
| Bidis (hand/machine-made) | 2403 | 28% | NIL |
These HSN codes must be used for billing, returns, and ITC claims related to gst on tobacco in india.
Compensation Cess Explained
The compensation cess is an additional levy on top of GST and applies to sin goods like tobacco, luxury cars, and aerated drinks. The cess on tobacco products, especially cigarettes, is extremely high to reduce consumption.
For example:
- gst on cigarettes can reach up to 290% compensation cess, making it one of the most heavily taxed items in the country.
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GST and Input Tax Credit (ITC) on Tobacco
Businesses engaged in manufacturing or selling tobacco can claim ITC on inputs like packaging, flavoring agents, and processing equipment — only if the tobacco is for resale or production.
However:
- No ITC is allowed on free samples or promotional gifting of tobacco.
- Proper documentation and HSN compliance are mandatory.
Compliance Considerations
Due to high tax rates and regulatory scrutiny, businesses must ensure:
- Correct classification under HSN 2402/2403
- Proper application of chewing tobacco gst rate and cigarette cess
- Timely filing of GST and compensation cess returns
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Final Thoughts
The gst on tobacco products in india is designed to be high to reduce public consumption and support health programs. Whether it’s chewing tobacco or cigarettes, understanding the gst rate, cess, and compliance rules is critical for both businesses and consumers. Always ensure proper HSN classification and billing to stay compliant with India’s evolving GST framework.
Hi there! I’m a Chartered Accountant with over 20 years of experience in financial accounting and a passion for writing. I enjoy simplifying complex topics like GST and income tax, believing that learning should be a lifelong journey. I'm here to share insights and make financial matters easier for everyone!
Frequently Asked Questions
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What is the gst rate on tobacco products in India?It is 28% GST + varying compensation cess depending on the product.
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What is the gst on cigarettes specifically?28% GST plus a compensation cess based on length/type (ranging from ₹1.05-₹4.17 per stick or ad valorem rates).
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What is the chewing tobacco gst rate?28% GST plus 142% compensation cess.
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Can retailers claim GST credit on tobacco items?Yes, if the tobacco is for resale and properly invoiced.
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Why is gst on tobacco in india so high?To discourage tobacco use and generate health-related tax revenue for the government.