GST on Tobacco & Cigarettes — Rates, Cess and NCCD (2026)

Updated: 3 June 2026 | GST Law | CGST + Compensation Cess

Tobacco products attract 28% GST (the highest GST slab) plus a GST Compensation Cess that varies by product type and cigarette length. Cigarettes additionally carry NCCD (National Calamity Contingent Duty). The total effective tax burden on cigarettes can exceed 50% of the retail price. ITC is available on business inputs but cess cannot be offset against regular GST output liability.

28% + Cess

GST on all tobacco products
Plus NCCD on cigarettes. Total tax on premium cigarettes can be ₹4,000+ per thousand sticks in cess alone.

Sin Goods Policy: Under the GST structure, tobacco products are classified as "sin goods" (demerit goods). They sit in the 28% slab — the same category as luxury cars, aerated drinks, and gambling. The compensation cess on tobacco also helps states recover revenue lost during the GST transition.

GST Compensation Cess on Cigarettes (2026)

Cigarette Type	GST Rate	Compensation Cess	NCCD (per 1000 sticks)
Non-filter ≤65 mm	28%	₹2,076 / thousand	₹50
Non-filter 65–75 mm	28%	5% + ₹2,747 / thousand	₹50
Filter ≤65 mm	28%	5% + ₹2,076 / thousand	₹330
Filter 65–70 mm	28%	5% + ₹2,747 / thousand	₹440
Filter 70–75 mm	28%	5% + ₹3,668 / thousand	₹440
Filter >75 mm (king size)	28%	5% + ₹4,170 / thousand	₹630

Source: GST Compensation Cess (Rates) Notification. NCCD rates as per Finance Act. Cess is paid separately and cannot be set off against regular CGST/SGST.

GST on Other Tobacco Products

Product	HSN Code	GST Rate	Compensation Cess
Bidis (handmade)	2402	28%	₹22 / thousand
Bidis (machine-made)	2402	28%	₹22 / thousand
Chewing tobacco (without lime tube)	2403	28%	160%
Chewing tobacco (with lime tube)	2403	28%	142%
Pan masala containing tobacco (gutkha)	2403	28%	96%
Hookah / narghile tobacco	2403	28%	72%
Pipe tobacco	2403	28%	72%
Snuff	2403	28%	72%
Unmanufactured tobacco	2401	5%	Nil
Tobacco stems	2401	5%	Nil

What Is NCCD on Tobacco?

NCCD (National Calamity Contingent Duty) is a Central excise duty that was retained specifically for tobacco products even after GST subsumed most other excise duties. It is levied under the Finance Act and is in addition to GST and the compensation cess.

NCCD on cigarettes ranges from ₹50 to ₹630 per thousand sticks based on length and filter type
NCCD on pan masala with tobacco (gutkha) is 10% of transaction value
NCCD is collected at the manufacturer stage, before the product enters the supply chain
It cannot be claimed as ITC by the manufacturer or any downstream buyer
Revenue from NCCD goes to the National Calamity Contingent Fund

Input Tax Credit (ITC) on Tobacco Inputs

Businesses in the tobacco supply chain — manufacturers, wholesalers, and retailers — can claim ITC on GST paid for their business inputs, subject to the following conditions:

Manufacturers: ITC available on raw tobacco (5% GST), machinery, packaging, services used in production of taxable tobacco goods
Wholesalers/Retailers: ITC available on GST paid when purchasing tobacco products for resale — offset against GST collected on sales
Compensation Cess: Cess paid cannot be offset against regular CGST or SGST. Cess paid on inputs can only be used to offset cess payable on outputs
NCCD: Not eligible for ITC — it is a non-creditable duty
Section 17(5) blocked credits do not specifically block tobacco ITC for regular trade — the blocks apply to personal consumption, food/beverages, and certain services

Why Tobacco and Petroleum Have the Highest Tax Rates

Both tobacco and petroleum products carry taxes beyond the normal GST structure for policy reasons:

Health and environmental cost: Tobacco causes significant healthcare burden; governments use taxation to reduce consumption and fund healthcare
WHO FCTC obligation: India is a signatory to the WHO Framework Convention on Tobacco Control, which mandates using fiscal policy to reduce tobacco use
Revenue generation: Tobacco is price-inelastic — consumption does not fall sharply even at high tax rates, making it a reliable revenue source
Petroleum — different reason: Petroleum products are kept outside GST entirely (not zero-rated — literally outside the GST framework) to protect state revenue and allow flexible pricing
Cess retention: The 28% GST slab alone was not enough to match pre-GST tax levels on tobacco, so compensation cess was introduced to bridge the gap

GST on E-Cigarettes and Heated Tobacco Products

E-cigarettes (electronic nicotine delivery systems) were banned for manufacture and sale in India under the Prohibition of Electronic Cigarettes Act, 2019. However, where trade does occur (e.g., import enforcement, lab testing), the applicable GST rate is 28% under the residual sin goods category.

Heated tobacco products (heat-not-burn devices) that are marketed differently are taxed at 28% + applicable cess based on their tobacco content and product classification.

Frequently Asked Questions

What is the GST rate on cigarettes in India?

Cigarettes attract 28% GST plus a GST Compensation Cess that varies by cigarette length. For cigarettes not exceeding 65 mm, the cess is ₹2076 per thousand sticks. For cigarettes between 65 mm and 75 mm, the cess is 5% + ₹2747 per thousand. For cigarettes exceeding 75 mm, the cess is 5% + ₹4170 per thousand. The total tax incidence on cigarettes is among the highest in the GST system, consistent with India's obligations under the WHO Framework Convention on Tobacco Control.

Is there GST on bidis (beedi)?

Yes. Bidis attract 28% GST. However, unlike cigarettes, the GST compensation cess on handmade bidis is ₹22 per thousand and on machine-made bidis it is ₹22 per thousand (without filter). Bidis are a significant item — the government deliberately keeps their cess lower than cigarettes but the 28% slab still applies, making bidis significantly more expensive post-GST.

Can a tobacco business claim Input Tax Credit (ITC) on its inputs?

ITC is broadly available for GST paid on inputs, capital goods, and input services in the tobacco manufacturing supply chain. However, the compensation cess paid on tobacco products cannot be set off against the regular GST liability. For retailers, ITC on purchases of tobacco products is available against their output GST. Note that tobacco products cannot be purchased from the composition scheme — they must be taxed under regular GST.

Why is tobacco taxed so heavily under GST?

Tobacco is classified as a demerit or sin good — products whose consumption is considered harmful to public health or society. Under GST, sin goods including tobacco, aerated drinks, and luxury cars attract 28% GST (the highest slab) plus an additional GST Compensation Cess. This dual levy serves two purposes: (1) to discourage consumption via high prices (health policy), and (2) to compensate states for revenue loss due to GST implementation.

What is NCCD and how does it apply to tobacco?

NCCD stands for National Calamity Contingent Duty. It is a Central excise-era duty that has been retained even under GST for tobacco products. It is levied over and above GST and cess. For cigarettes, NCCD ranges from ₹50 to ₹630 per thousand sticks depending on length. For pan masala/gutkha, NCCD is 10% of the value. NCCD is a legacy levy retained to maintain high taxation on tobacco and to fund calamity relief operations.

Related GST Pages

GST on Pan Masala GST Rate Finder GST Registration GST Return Filing GST on Aerated Drinks

GST Compliance for Your Tobacco Business

Our GST team helps manufacturers, wholesalers, and retailers manage tobacco GST compliance — cess calculations, NCCD filings, and ITC reconciliation.

Talk to a GST Expert →

◆ Available in 71 Cities

Gst On Tobacco Near You

Expert CA/CS assistance for gst on tobacco across India. Click your city for local details.

→ New Delhi → Mumbai → Bengaluru (Bangalore) → Hyderabad → Chennai → Kolkata → Pune → Ahmedabad → Noida (UP) → Gurgaon (Gurugram) → Jaipur → Lucknow → Chandigarh → Surat → Kochi (Cochin) → Faridabad → Ghaziabad → Greater Noida → Panipat → Sonipat → Manesar (IMT) → Dharuhera → Mathura → Palwal → Agra → Kosi Kalan → Aligarh → Khair → Jewar (Noida International Airport) → Kanpur → Varanasi (Kashi) → Prayagraj (Allahabad) → Meerut → Bareilly → Moradabad → Gorakhpur → Firozabad → Saharanpur → Muzaffarnagar → Bulandshahr → Hapur → Karnal → Kurukshetra → Ambala → Hisar → Rohtak → Yamunanagar → Rewari → Bhiwani → Jodhpur → Udaipur → Kota → Ajmer → Bikaner → Ludhiana → Amritsar → Jalandhar → Patiala → Mohali (SAS Nagar) → Bathinda → Dehradun → Haridwar → Rudrapur → Shimla → Solan (Baddi-Barotiwala-Nalagarh) → Bhopal → Indore → Gwalior → Jammu → Srinagar → Panchkula

Ask Veda