New GST on Tobacco Products in India: Cigarettes, Chewing Tobacco & More
Quick Summary
- The Indian government has increased the GST rate on tobacco products to 40% starting September 2025, with an additional compensation cess still applied.
- Cigarettes, chewing tobacco, and smoking tobacco face very high total tax burdens due to the combined GST and compensation cess rates.
- Businesses can claim input tax credit on tobacco-related inputs, but not on free samples or promotional gifts.
- Compliance requires proper HSN classification, correct cess application, and timely filing of GST and cess returns.
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.
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GST Rate on Tobacco Products in India
Tobacco products are among the highest taxed goods in India. Before 1st Feb 2026, most tobacco products were taxed at 28% GST, and many also attracted a compensation cess depending on the product category. From 1st Feb 2026, the revised notified structure applies, under which most specified tobacco products move to 40% GST, while bidis move to 18% GST. The revised regime also introduces a special valuation method based on the declared Retail Sale Price (RSP) for the notified goods, and the earlier compensation cess on specified tobacco products is withdrawn.
New Tobacco GST Rate
The table below combines the old GST rates and the revised GST rates in one place. The old rate column shows the GST rate applicable before 1st Feb 2026, while the new rate column shows the revised GST rate applicable from 1st Feb 2026.
| Tobacco Product | HSN Code | New GST Rate (From 1 Feb 2026) |
Old GST Rate (Before 1 Feb 2026) |
|---|---|---|---|
| Cigarettes | 2402 | 40% | 28% |
| Chewing tobacco / zarda / gutkha / khaini | 2403 | 40% | 28% |
| Cigars and cigarillos | 2402 | 40% | 28% |
| Smoking tobacco | 2403 | 40% | 28% |
| Bidis | 2403 | 18% | 28% |
| Unmanufactured tobacco other than tobacco leaves | 2401 | 40% | 28% |
| Tobacco leaves | 2401 | 5% | 5% |
(From 1 Feb 2026) 40%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 40%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 40%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 40%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 18%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 40%
(Before 1 Feb 2026) 28%
(From 1 Feb 2026) 5%
(Before 1 Feb 2026) 5%
HSN Codes for Tobacco Products
Tobacco products are mainly classified under Chapter 24. In practical terms, the most relevant HSN groupings are:
- HSN 2401 - Unmanufactured tobacco and tobacco refuse
- HSN 2402 - Cigarettes, cigars, cheroots, and cigarillos
- HSN 2403 - Other manufactured tobacco such as chewing tobacco, gutkha, smoking tobacco, and bidis
How to Calculate GST on Tobacco Products
From 1st Feb 2026, the notified tobacco products follow an Retail Sales price based valuation mechanism. That means GST is calculated based on the declared retail sale price printed on the pack, not on the normal transaction value method used for many other goods.
GST Calculation Formula
For a tobacco product taxed at 40% GST:
Taxable Value = RSP ÷ 1.40
GST Amount = RSP - Taxable Value
For a tobacco product taxed at 18% GST:
Taxable Value = RSP ÷ 1.18
GST Amount = RSP - Taxable Value
These formulas help you extract the GST portion from the declared retail price.
Example 1: Cigarette Pack at 40% GST
Suppose the declared RSP of a cigarette pack is Rs 140.
Taxable Value = 140 ÷ 1.40 = Rs 100
GST Amount = 140 - 100 = Rs 40
So, if the RSP is Rs 140, the GST portion is Rs 40.
Example 2: Chewing Tobacco Pouch at 40% GST
Suppose the declared RSP of a chewing tobacco pouch is Rs 70.
Taxable Value = 70 ÷ 1.40 = Rs 50
GST Amount = 70 - 50 = Rs 20
So, if the RSP is Rs 70, the GST portion is Rs 20.
Example 3: Bidi Bundle at 18% GST
Suppose the declared RSP of a bidi bundle is Rs 118.
Taxable Value = 118 ÷ 1.18 = Rs 100
GST Amount = 118 - 100 = Rs 18
So, if the RSP is Rs 118, the GST portion is Rs 18. The lower GST rate applies because bidis were moved to the 18% slab from 1st Feb 2026.
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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, flavouring 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 the cigarette rate
- 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 on tobacco products 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.
