The government has imposed a fresh and comprehensive excise duty framework on cigarettes and other tobacco products, signalling a decisive tightening of its taxation and regulatory stance on the sector. Industry reacted with dismay, saying it was "shocked and surprised" at the move.

A series of Central Excise notifications issued on Thursday here revise duty rates, clarify product classification and strengthen compliance norms, significantly increasing the tax burden on tobacco manufacturers.

Under the revised structures, cigarettes will attract a specific excise duty ranging from Rs 2,050-8,500 per 1000 sticks, depending on their length and characteristics. Shorter cigarettes fall in lower duty slabs, while longer cigarettes attract progressively higher excise rates. This levy will apply in addition to the existing Goods and Services Tax, sharply raising the overall tax incidence on cigarettes.

The notifications also tighten the excise regime for other tobacco products, including cigars, cigarillos, chewing tobacco and other manufactured tobacco substitutes. Clearer classification rules have been laid down to ensure uniform taxation of similar products, closing loopholes that earlier allowed some manufacturers to fall under lower-duty categories.

A key focus of the new framework is stricter valuation and compliance. The revised rules specify tighter norms for determining assessable value to curb under-reporting and misdeclaration. Several exemptions and concessional duty provisions have been withdrawn or restricted to prevent revenue leakage.

For chewing tobacco and similar products packed in pouches, the government has reinforced the capacity-based levy system, along with stricter production controls, reporting and monitoring requirements.

The move has triggered an immediate reaction from the tobacco industry. The Tobacco Institute of India (TII) said it was "shocked and surprised" by what it termed an unprecedented excise hike, arguing that the scale of the increase goes far beyond expectations and could have far-reaching economic consequences.

The industry body warned that the higher tax burden would affect millions of people across the tobacco value chain, including farmers, MSMEs, retailers and ancillary businesses. TII cautioned that the sharp increase could weaken long-established local value chains while significantly boosting illicit trade. Pointing to existing challenges, the institute said that for every three legal cigarettes sold in India, one illicit or smuggled cigarette already enters the market.

According to the industry body, further tax increases risk distorting the market in favour of illegal operators, reducing legitimate sales and ultimately hurting government revenues.

The institute also highlighted that legal cigarettes account for only about 10 per cent of total tobacco consumption but contribute nearly 80 per cent of overall tobacco tax revenues, underscoring what it described as a disproportionate tax burden. It added that cigarette taxes in India, measured as a percentage of per capita Gross Domestic Product (GDP), rank among the highest globally.