Central Excise Amendment Bill 2025

Central Excise Amendment Bill 2025

Why in News?

The Parliament has passed the Central Excise (Amendment) Bill, 2025 which introduces higher excise duties on tobacco products, aiming to curb consumption and promote healthier lifestyles.

Background of the Central Excise (Amendment) Bill, 2025

• When Goods and Services Tax (GST) was introduced in India on 1 July 2017, many central excise duties were set aside for goods covered under GST. However, “sin goods” such as tobacco and related products remained subject to an additional levy called the GST Compensation Cess. This cess, combined with GST, maintained a high indirect tax burden on tobacco products.
• The GST Compensation Cess was originally envisaged as a temporary measure to compensate states for revenue losses following GST rollout. With time, the liability under the cess scheme is being cleared. In this context, the government sought a permanent and stable tax mechanism so that the tax burden on tobacco does not fall once the cess ends. The 2025 Bill aims to address this need. 
• The Bill proposes to amend the Central Excise Act, 1944. It replaces the existing tariff table under the Fourth Schedule of the Act with a revised structure for excise duties on tobacco and tobacco‑related products. This ensures legal continuity of indirect taxation on “sin goods” once the compensation cess is phased out.

Provisions of the Central Excise (Amendment) Bill, 2025

• New excise duty on cigarettes: A key provision fixes specific duty on cigarettes based on their stick‑length and type. The new duty ranges between ₹2,700 and ₹11,000 per 1,000 sticks. This replaces the older duty range of ₹200‑₹735 per 1,000 sticks under the older structure.
• Excise duty on unmanufactured tobacco: For raw or unmanufactured tobacco (for example cured tobacco leaves), the Bill proposes to levy a duty of 60–70 percent, brings back a uniform high duty on raw tobacco, ensuring consistent tax incidence across all forms of tobacco.
• Higher duties on other tobacco products: The Bill expands excise duty to cover a wide set of tobacco‑related items. For example: chewing tobacco will now attract a 100% duty (up from 25%). Tobacco for hookah or pipe use will face a 40% duty (from earlier 25%). Duty on smoking mixtures 60% to 325% substantially increased (for pipe or cigarette‑mix tobacco). 
• Coverage across various tobacco and related items: The Bill covers a broad range of products. It applies not only to cigarettes but also to cigars, cheroots, hookah tobacco, chewing tobacco, snuff, zarda, scented tobacco, and other manufactured or raw tobacco. This ensures uniform taxation across all tobacco‑derived products. 

Tobacco Burden in India

• About 267 million adults (age 15 and above) in India use tobacco in some form. This equals roughly 28.6‑29 percent of all adults. Tobacco use includes smoking (cigarettes, bidis, hookah) and smokeless tobacco (SLT) like gutkha, khaini, betel‑quid with tobacco, zarda etc.
• Tobacco causes about 1.35 million deaths in India every year. Many of these deaths result from cancers, lung diseases, heart diseases, and strokes triggered by tobacco use. Smoking and smokeless forms both contribute to health risks. 
• In the period 2017–2018, the economic cost of diseases and deaths attributable to tobacco for people aged 35 or older was estimated at INR 1,773.4 billion (≈ US$ 27.5 billion). Of this, about 22% was direct medical and non‑medical cost. The remaining 78% arose from lost productivity. The burden amounts to roughly 1% of India’s GDP.
• In India SLT use remains very common. A large share of tobacco consumers use forms like gutkha, khaini or betel with tobacco rather than smoking. Many SLT users suffer from oral cancers, mouth diseases, and other health problems.
• A substantial fraction of cancers in India arise because of tobacco use. Nearly 27% of all cancer cases are linked to tobacco consumption. Tobacco also contributes heavily to non‑communicable diseases (NCDs). Treating diseases caused by tobacco imposes heavy pressure on healthcare infrastructure.

Implications of this Act

• • Health Benefits: The higher excise duties on tobacco products under the Bill will raise retail prices. When cigarettes, chewing tobacco and other forms become costlier people will buy less. Lower tobacco use could lead to fewer cases of smoking‑related diseases such as cancer, heart disease, chronic respiratory illnesses and stroke.

• Sustained Revenue: With the old levy (GST compensation cess) ending by March 2026, the Bill ensures that the government retains high tax incidence on tobacco products. The new excise framework gives the government fiscal space to collect stable duty on various tobacco items. The exchequer will avoid a sudden drop in revenues once the cess is phased out.

• Long‑Term Gains: Over time lower tobacco consumption will reduce the burden of health‑care costs, and lose productivity due to illness. The savings in health expenditure and improved public health outcomes will benefit society broadly. Reduced demand for tobacco may also encourage shifts by farmers and growers away from tobacco cultivation.

• Burden for Industry: Manufacturers will need to follow stricter tax and regulatory rules under the new law. Smaller and informal producers may face difficulty with documentation and compliance. These shops and makers might get squeezed and large legal producers may dominate.