After the passing of Central Excise Bill 2025, duty on tobacco and cigarettes has increased, but the question is whether this step is only for health policy or the beginning of major changes in the tax structure? The government is claiming that farmers and laborers will not be affected.
New Delhi. An important decision was taken on Thursday in the winter session of Parliament. The Central Excise (Amendment) Bill, 2025 has been approved, under which the excise duty on tobacco and cigarettes was increased. In the eyes of common people, this may seem like just increasing taxes, but the government says that there are many big objectives hidden behind it – earning states, public health and meeting WHO benchmarks.
Is the duty imposed on tobacco cess or excise duty?
During the discussion in Rajya Sabha, Union Finance Minister Nirmala Sitharaman made it clear that the increased duty on cigarettes is not a ‘cess’ but an excise duty. This means that states will also get a share of this tax and it will be distributed on the basis of the recommendations of the Finance Commission. After this statement, the concerns of the states were relieved to a great extent and the bill was easily approved.
Will the new duty hurt tobacco farmers and beedi workers?
This question was the most discussed. The Finance Minister clearly said that this bill will not cause any harm to farmers and beedi workers. He said that the government is running several schemes to encourage farmers to cultivate other crops other than tobacco, such as the Crop Diversification Scheme. Between 2017-18 to 2021-22, farmers have shifted to other crops on 1.12 lakh acres of land. Regarding beedi labourers, he said that there are about 50 lakh registered laborers in the country and schemes made for their welfare are running across the country. That means the government is changing the tax structure without giving them any support.
Are the increased tax rates linked to WHO benchmarks?
According to the Finance Minister, the total tax on cigarettes in India currently stands at around 53% of the retail price. Whereas WHO’s benchmark is 75%. This means that India is still far behind the global health standards. He said that when GST came, even taxes and cess on tobacco products were not able to reach the WHO benchmark, and that is why the ‘affordability index’ of tobacco remained very high. The government wants that tobacco should not remain cheap, so that people stay away from its consumption and public health improves.
Why was this new bill necessary after the abolition of GST Compensation Cess?
After the implementation of GST, there was a decline in the earnings of many states, to compensate for which compensation cess was imposed. Now this cess has ended. To fill this gap and make the tax system clean, this new Excise Amendment Bill of 2025 has been brought. This bill had already been passed in the Lok Sabha and now it became a law after getting the approval of the Rajya Sabha.
Is this step an attempt to save people’s lives by making tobacco expensive?
This is the government’s claim. Due to increase in tax, cigarettes and tobacco products will become expensive, which will increase the possibility of reducing their consumption. If we look at the bigger picture, the government is calling it a health-focused policy and saying that in the coming time, India will move closer to the WHO guidelines.