GST Rate and Cess for Tobacco and Cigarettes

In India, cigarettes and other tobacco products—including pan masala, cigars, cigarillos, hookah and similar items—are placed in the highest GST slab of 28%.

In addition to this base GST rate, these products also attract:

• A Compensation Cess under the GST law, and
• Duties under the Central Excise Act such as the National Calamity Contingent Duty (NCCD).

This multi-layered tax structure ensures that the overall tax burden on tobacco products remains among the highest in the country, in line with the government’s objective to discourage consumption while generating public revenue.

This article provides a clear overview of the current GST rate for tobacco products and cess rates, the relevant HSN codes, and the key implications for both consumers and businesses dealing in tobacco products.

Latest Update

• Current Tax Structure: Tobacco products, including cigarettes, pan masala, gutkha and chewing tobacco, continue to attract 28% GST, along with excise duty, NCCD and the existing Compensation Cess, as per discussions in the 56th GST Council meeting.
• Proposed Sin Tax: The 56th GST Council meeting also discussed the possibility of introducing a 40% “sin tax” on certain tobacco products (such as cigarettes and pan masala) to further discourage consumption.
• Pending Notification: This proposal is not yet officially notified by the CBIC. The current 28% GST plus applicable cess remains in force until a formal notification is issued.

Current GST Rate on Tobacco and Cigarettes

Tobacco products in India are taxed at a base GST rate of 28%, the highest GST slab. In addition, most tobacco items attracted a compensation cess, resulting in one of the heaviest overall tax burdens in the country.

These rates made the tobacco GST rate one of the highest tax categories in India, reflecting the government’s strategy to deter tobacco use while raising public revenue.

New Proposed GST Rate on Tobacco Products in India  

The 56th GST Council has recommended a 40% GST rate for sin goods—including tobacco and pan masala, to further discourage consumption. However, the specific implementation date is postponed until after the central government settles its compensation cess loans.

Until the official CBIC notification, the 28% GST plus cess regime remains in force for tobacco products.

In summary, the 40% GST increase for tobacco products is approved but not yet notified; the effective rate continues at 28% GST plus cess until further CBIC action.  

Other Duties and Taxes Imposed on Cigarettes and other Tobacco Products

Tobacco in India is classified as a “sin good” and is therefore subject to multiple layers of taxation, including Central Excise duty, National Calamity Contingent Duty (NCCD), Goods and Services Tax (GST), and the Compensation Cess. Revenue generated from tobacco sales forms a significant source of income for the Government of India. However, according to the World Health Organisation (WHO), the total tax burden on tobacco products should be at least 75% of the retail price to effectively discourage consumption. India’s overall tobacco taxation is still below this recommended level, prompting calls for higher taxes from public health experts and policy advocates.

To address these concerns, the government has been periodically increasing taxes on cigarettes and other tobacco products. For example, in Budget 2023, the NCCD rate was raised by 16%, signalling the government’s continued commitment to tightening fiscal measures on tobacco.

Below is a summary of the various duties and taxes imposed on cigarettes and other tobacco products. (This list is indicative and not exhaustive.)

GST and Input Tax Credit (ITC) on Tobacco

Businesses that manufacture or trade in tobacco products can avail Input Tax Credit (ITC) on raw materials, packaging materials, flavouring agents, and processing equipment, provided these inputs are directly used for resale or in the production of taxable tobacco products.

However:

• ITC cannot be claimed on free samples or promotional gifts of tobacco.
• Accurate documentation—including proper HSN code compliance—is mandatory for claiming ITC and for smooth filing of GST returns.

Tobacco Cess and GST Rate for PAN, Gutkha, Chewing Tobacco

In the table below, we have given the list of items and their respective tobacco GST rates and cess,

Item Description	Tobacco GST Rate	Tobacco GST Cess
Tobacco and Tobacco Products
Unmanufactured tobacco (without lime tube) – bearing a brand name	28%	71%
Unmanufactured tobacco bearing a brand name	28%	65%
Tobacco refuse, bearing a brand name	28%	61%
Chewing tobacco (without lime tube)	28%	160%
Chewing tobacco (with lime tube)	28%	142%
Filter khaini	28%	160%
Jarda scented tobacco	28%	160%
Pan masala containing tobacco ‘Gutkha’	28%	204%

Duties and Cesses on Cigarettes

The table below provides the latest applicable rates of excise duty, NCCD, and compensation cess on the manufacture of cigarettes and other tobacco products (rates in ₹ per 1,000 sticks):

* Valid for cigarettes exceeding 65 mm but up to 75 mm in length. ** The filter length is included in the total cigarette length—taken as 11 mm or the actual filter length, whichever is higher. # NCCD rates have been effective from 2 February 2023, as announced in Budget 2023.

• The excise duty on chewing tobacco, snuff, hukkah or gudaku tobacco, tobacco extracts and essence, and jarda-scented tobacco is 0.5%.
• The excise duty on cigarillos of tobacco substitutes is 1%.

Important:

• Central Excise duty and NCCD are calculated on the abated value (where abatements are allowed under the Central Excise Act).
• GST and Compensation Cess are computed on the transaction value, which already includes excise duty and NCCD.
• No abatement is provided for tobacco products under the GST law.

How to Calculate GST on Cigarettes

Here’s a step-by-step illustration of how GST and other duties are calculated on a pack of 10 non-filter cigarettes (up to 65 mm in length):

Note: Tax and duty rates—as well as the abatement percentage (45% in this example)—are subject to change as per government policy.

HSN Code for Tobacco

Tobacco and tobacco products fall under Chapter 24 of the HSN Code. HSN Code is an internationally accepted system for classifying goods in the course of international trade. In the case of tobacco products, the following HSN code must be mentioned on the GST invoice based on the type of product sold:

GST Rate and HSN Code for Unmanufactured Tobacco

HSN Code	HSN Code Description	GST Rate
2401 10	Tobacco, not stemmed or stripped:	28%
2401 10 10	Flue cured virginia tobacco	28%
2401 10 20	Sun cured country (natu) tobacco	28%
2401 10 30	Sun cured virginia tobacco	28%
2401 10 40	Burley tobacco	28%
2401 10 50	Tobacco for manufacture of biris, not stemmed	28%
2401 10 60	Tobacco for manufacture of chewing tobacco	28%
2401 10 70	Tobacco for manufacture of cigar and cheroot	28%
2401 10 80	Tobacco for manufacture of hookah tobacco	28%
2401 10 90	Other	28%
2401 20	Tobacco partly or wholly stemmed or stripped:
2401 20 10	Flue cured virginia tobacco	28%
2401 20 20	Sun cured country (natu) tobacco	28%
2401 20 30	Sun cured virginia tobacco	28%
2401 20 40	Burley tobacco	28%
2401 20 50	Tobacco for manufacture of biris	28%
2401 20 60	Tobacco for manufacture of chewing tobacco	28%
2401 20 70	Tobacco for manufacture of cigar and cheroot	28%
2401 20 80	Tobacco for manufacture of hookah tobacco	28%
2401 20 90	Other	28%
2401 30 00	Tobacco refuse	28%

HSN Code for Cigarettes

HSN Code	HSN Item Description	GST Rate
2402	CIGARS, CHEROOTS, CIGARILLOS AND CIGARETTES, OF TOBACCO OR OF TOBACCO SUBSTITUTES
2402 10	Cigars, cheroots and cigarillos, containing tobacco:	28%
2402 10 10	Cigar and cheroots	28%
2402 10 20	Cigarillos	28%
2402 20*	Cigarettes, containing tobacco:	28%
2402 20 10	Other than filter cigarettes, of length not exceeding 65 millimetres	28%
2402 20 20	Other than filter cigarettes, of length exceeding 65 millimetres but not exceeding 70 millimetres	28%
2402 20 30	Filter cigarettes of length (including the length of Free the filter, the length of filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres.	28%
2402 20 40	Filter cigarettes of length (including the length of Free the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres not exceeding millimetres	28%
2402 20 50	Filter cigarettes of length (including the length of Free the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 75 millimetres but not exceeding 85 millimetres	28%
2402 20 60	Filter cigarettes of length (including the length of Free the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 75 millimetres but not exceeding 85 millimetres
2402 20 90	Other	28%
2402 90	Other:	28%
2402 90 10	Cigarettes of tobacco substitutes	28%
2402 90 20	Cigarillos of tobacco substitutes	28%
2402 90 90	Other	28%

GST Rate and HSN for Tobacco Products and Substitutes

HSN Code	HSN Item Description	GST Rate
2403	OTHER MANUFACTURE TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES; HOMOGENISED OR RECONSTITUTED TOBACCO; TOBACCO EXTRACTS AND ESSENCES
	Smoking tobacco, whether or not containing tobacco substitutes in any proportion:
2403 11	Water pipe tobacco	28%
2403 11 10	Hookah or gudaku tobacco	28%
2403 11 90	Other	28%
2403 19	Other:
2403 19 10	Smoking mixtures for pipes and cigarettes other than paper rolled biris, manufactured	28%
2403 19 21	Smoking mixtures for pipes and cigarettes other than paper rolled biris, manufactured without the aid of machine	28%
2403 19 29	Other	28%
2403 19 90	Other	28%
	Other:
2403 91 00	"Homogenised" or "reconstituted" tobacco	28%
2403 99	Other:
2403 99 10	Chewing tobacco	28%
2403 99 20	Preparations containing chewing tobacco	28%
2403 99 30	Jarda scented tobacco	28%
2403 99 40	Snuff	28%
2403 99 50	Preparations containing snuff	28%
2403 99 60	Tobacco extracts and essence	28%
2403 99 70	Cut-tobacco	28%
2403 99 90	Other	28%

Compliance Considerations

• Correct HSN Classification: Ensure every product is accurately classified under HSN 2402 (cigarettes, cigars, cigarillos) or HSN 2403 (chewing tobacco, gutkha, bidis, smoking tobacco).

• Accurate Tax Application: Apply the correct GST rate—now 40% base rate effective 22 September 2025—along with the applicable compensation cess for each tobacco product category.

• Timely Filing: File both GST returns and compensation cess returns within the prescribed deadlines to avoid penalties and interest.

Because tobacco products attract some of the highest taxes and strict regulatory oversight, businesses dealing in cigarettes, chewing tobacco, bidis, or other tobacco items must take extra care to remain compliant:

Conclusion

Cigarettes and other tobacco products continue to be heavily taxed through GST, excise duty, NCCD and compensation cess, yet prices have only inched up slightly compared with the pre-GST era.

With the 56th GST Council meeting on the horizon, policymakers are considering a 40% “sin tax” on tobacco products to further discourage consumption and boost public health revenues. If implemented, this additional levy could raise retail prices, but the actual impact on affordability and overall consumption will depend on the final notification and market response.

Always maintain proper billing practices and HSN compliance to stay aligned with India’s evolving GST framework and to avoid any legal or financial setbacks. Stay updated and stay compliant! Confused about the right GST rate for your products or services? Our experts can guide you on the correct GST rates, filing & registration.