Parliament approves Bill to levy excise duty on tobacco

Sitharaman says the Bill does not impose an additional tax and maintains the overall burden already applicable under GST

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Parliament on Thursday approved a Bill to levy a higher excise duty on tobacco and related products once the GST compensation cess ends, with the Rajya Sabha returning the legislation to the Lok Sabha.

The Lok Sabha passed the Central Excise (Amendment) Bill, 2025, on Wednesday.

Replying to a discussion on the Bill in Rajya Sabha, Finance Minister Nirmala Sitharaman said this is not an additional tax, and the tax burden, as currently applicable under the GST regime, will agreed earlier, that the compensation cess collection will probably come to a stop at the end of December.

"Let me assure here itself straight away that the tobacco products will still be taxed under the demerit category at 40 per cent in the GST frame of things. They will still be taxed at 40 per cent, but there will not be any compensation," Sitharaman said.

The provisions of the Bill will come into effect once the GST compensation cess, which is currently levied on tobacco, comes to an end.