The Centre on Wednesday notified February 1 as the implementation date for fresh levies on tobacco products and pan masala, a move that will increase prices of these items across the country. Under the revised framework, the existing GST compensation cess on tobacco and pan masala will be withdrawn from February 1.
New Tax Structure Replaces Compensation Cess
In its place, the government will impose additional excise duty on tobacco products and introduce a Health and National Security Cess on pan masala, over and above the applicable GST rates.
As per the notification, pan masala, cigarettes, tobacco and similar products will attract a 40 per cent GST, while beedis will be taxed at 18 per cent. Beyond GST, pan masala manufacturers will have to pay the newly introduced cess, while cigarettes and other tobacco products will be subject to additional excise duty.
Rules Notified, Parliament Approval Already In Place
The Finance Ministry has also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, laying down the mechanism for duty assessment and collection.
Parliament had cleared two Bills in December enabling the levy of the new cess on pan masala and excise duty on tobacco products. With the notification issued, the current compensation cess regime will officially end on February 1, paving the way for the new tax structure to take effect.
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