Centre Notifies Additional Excise Duty on Tobacco, New Cess on Pan Masala from February 1

New Delhi: The Centre on Wednesday notified February 1, 2026, as the date from which additional excise duty on tobacco products and a new Health and National Security Cess on pan masala will be imposed.

As per the government notification, the new levies will be charged over and above the Goods and Services Tax (GST) and will replace the existing GST compensation cess that is currently being levied on tobacco products and pan masala.

From February 1, pan masala, cigarettes, tobacco and similar products will attract 40 per cent GST, while biris will be taxed at 18 per cent GST. In addition to this, pan masala will be subject to the Health and National Security Cess, while tobacco and related products will attract additional excise duty.

The Finance Ministry on Wednesday also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, which lay down the mechanism for assessment and collection of duty.

Parliament had in December approved two Bills allowing the levy of the Health and National Security Cess on pan masala manufacturing and excise duty on tobacco products.

The government has now fixed February 1 as the date for implementation of these levies.

The GST compensation cess, which is currently levied at different rates on tobacco and pan masala, will cease to be applicable from February 1.

Before the introduction of GST in 2017, excise duty was a major component of taxation on cigarettes and other tobacco products and was revised from time to time. After GST came into force, excise duty was reduced to a nominal level, with the compensation cess accounting for a large part of the tax. With the compensation cess being phased out, the government has moved to bring back excise duty along with GST.

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