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.

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    GST Rate on Tobacco Products

    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.

    Frequently Asked Questions (FAQs)

    • What is the gst rate on tobacco products in India?
      It is 28% GST + varying compensation cess depending on the product.
    • 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).
    • What is the chewing tobacco gst rate?
      28% GST plus 142% compensation cess.
    • Can retailers claim GST credit on tobacco items?
      Yes, if the tobacco is for resale and properly invoiced.
    • Why is gst on tobacco in india so high?
      To discourage tobacco use and generate health-related tax revenue for the government.
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