New Tobacco and Pan Masala Taxes Set to Begin in February: What You Need to Know

Starting February 1, the government will implement new excise duties on tobacco products and a health cess on pan masala. These changes will replace the existing GST compensation cess and introduce higher tax rates on various tobacco items. The Finance Ministry has also announced new regulations regarding tobacco packaging. This article provides essential details on how these new levies will impact consumers and the tobacco market.

By Narendra Chaudhary Jan 1, 2026, 10:56 IST

Government Announces New Levies on Tobacco Products

New Delhi: The government has officially set February 1 as the date when new excise duties on tobacco products and a health cess on pan masala will take effect.

These new taxes will be in addition to the existing GST rates and will replace the current compensation cess applied to these 'sin goods'.

Starting February 1, products like pan masala, cigarettes, and tobacco will be subject to a GST of 40%, while 'biris' will incur an 18% GST, as per the latest government announcement.

Additionally, a Health and National Security Cess will be imposed on pan masala, and tobacco products will face an extra excise duty.

On Wednesday, the Finance Ministry also introduced the Chewing Tobacco, Jarda Scented Tobacco, and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026.

In December, Parliament passed two Bills that facilitate the implementation of the new Health and National Security Cess on pan masala production and the excise duty on tobacco.

The government has confirmed that these new levies will come into effect on February 1, marking the end of the current GST compensation cess.