India Business Journal - Come February, cigarettes will burn a hole in your pocket, thanks to the new BED

INDUSTRY

Come February, cigarettes will burn a hole in your pocket, thanks to the new BED

IBJ Bureau
Jan 02, 2026

Cigarette prices are set to rise from February 1, 2026, after the government has reintroduced the Basic Excise Duty (BED) on cigarettes. The BED on tobacco products, including pan masala and cigarettes, is on top of the Goods and Services Tax (GST) rate of 40 per cent.

The higher GST levy of 40 per cent replaces the earlier Compensation Cess, which has been removed as a part of a broader decision to rationalise the GST.

Under the new framework, the BED will be levied per 1,000 cigarette sticks, with rates varying based on whether a cigarette is filtered or unfiltered and its length in millimetres (mm).

According to the notification, unfiltered cigarettes shorter than 65 mm will attract BED of Rs 2,050 per 1,000 sticks, while filtered cigarettes up to 70-75 mm will be taxed at Rs 5,400 per 1,000 sticks. Longer and premium variants will face even higher levies, with duties going up to Rs 8,500 per 1,000 sticks.

This represents a sharp departure from the post-GST regime introduced in 2017, when BED on cigarettes was reduced to a token Rs 5 per 1,000 sticks for most categories and Rs 10 per 1,000 sticks for cigarettes longer than 75 mm. In effect, BED had become fiscally irrelevant, with GST and Compensation Cess doing most of the heavy lifting.