In a significant move aimed at safeguarding public health and strengthening the country’s fiscal system, the Parliament today passed the Central Excise (Amendment) Bill, 2025, with the Rajya Sabha approving and returning it to the Lok Sabha. The legislation seeks to amend the historic Central Excise Act of 1944, with a primary focus on substantially increasing excise duties and cess on a wide range of tobacco products including cigarettes, cigars, hookah tobacco, chewing tobacco, zarda and scented tobacco.
Why This Amendment Matters
The Government has emphasized that the amendment is essential to provide fiscal flexibility after the existing tobacco cess ends. By raising excise duties, the government aims to protect tax incidence, curb consumption of harmful products, and generate additional revenue that can be used for public welfare initiatives.
The Bill was moved by Minister of State for Finance, Pankaj Chaudhary.
Sharp Rise in Excise Duties on Cigarettes: Under the existing Central Excise Act, excise duties on cigarettes range from ₹200 to ₹735 per thousand cigarettes.
The amended Bill now increases that range substantially to ₹2,700 to ₹11,000 per thousand cigarettes, marking a crucial step to discourage smoking and reduce the health burden on the public.
Higher Duties on Manufactured Tobacco Products: The Bill also boosts excise duties on all manufactured tobacco items, ensuring a strong deterrent against their consumption. Notable hikes include:
- Chewing tobacco: Duty increased from 25% to 100%
- Hookah tobacco: Duty raised from 25% to 40%
- Smoking mixtures for pipes and cigarettes: Duty increased dramatically from 60% to 325%
These increases are designed to protect citizens especially youth and vulnerable groups from the severe health risks associated with tobacco addiction.
States Will Benefit From Higher Excise Revenues: During the Rajya Sabha debate, Union Finance Minister Nirmala Sitharaman noted that the enhanced duties on cigarettes would directly benefit states.
She clarified that the increased revenue is not a cess but excise duty, which means the amount will be redistributed to states as per the Finance Commission’s recommendations.
This ensures fairness and strengthens states’ financial capacities to invest in health, education and welfare programs.
Protection for Tobacco Farmers and Beedi Workers: Addressing concerns about the livelihoods of tobacco farmers and beedi workers, the Finance Minister reassured the House that the Bill would not harm their interests.
She highlighted several existing government schemes, including crop diversification programs, which aim to support tobacco farmers and help them shift to more sustainable and profitable crops.
These initiatives ensure that while harmful consumption is discouraged, the farmers who depend on tobacco cultivation are not left behind.
A Public-Centric Reform for a Healthier Future: The Central Excise (Amendment) Bill, 2025 marks a bold and progressive step toward improving public health, reducing tobacco consumption, and strengthening the nation’s fiscal resilience. With higher duties, a clear redistribution mechanism, and safeguards for farmers and workers, the legislation reflects a balanced approach one that prioritizes the wellbeing of the public while ensuring economic stability and social protection.
