Since 1 February 2026, cigarettes, chewing tobacco, pan masala and gutkha attract 40% GST — the demerit / "sin goods" rate under GST 2.0 — plus an additional excise duty on tobacco products and a Health & National Security (HSNS) Cess on pan masala. These new levies replaced the old GST Compensation Cess, which was discontinued on the same date. Bidis are taxed at 18% GST. The overall tax burden was designed to stay broadly the same as before.
GST on Tobacco Products — Rate Table (2026)
The current GST rate for every common tobacco product, with HSN code and the extra levy that sits on top. Rates below apply from 1 February 2026.
| Product | HSN | GST Rate | Extra Levy |
|---|---|---|---|
| Cigarettes (all lengths) | 2402 | 40% | Additional excise ₹2,050–₹8,500 / 1,000 sticks |
| Cigars & cheroots | 2402 | 40% | Additional excise duty |
| Bidis (handmade & machine-made) | 2402 | 18% | — |
| Chewing tobacco / zarda | 2403 | 40% | Additional excise duty |
| Pan masala containing tobacco (gutkha) | 2403 | 40% | HSNS cess (capacity/weight based) |
| Pan masala without tobacco | 2106 | 40% | HSNS cess |
| Hookah / pipe / snuff tobacco | 2403 | 40% | Additional excise duty |
| Unmanufactured tobacco | 2401 | 5% | — |
| Tobacco refuse / stems | 2401 | 5% | — |
Rates reflect the sin-goods regime effective 1 Feb 2026. Additional excise / HSNS cess figures vary by product and machine capacity — always confirm the exact figure on the official portal before invoicing.
What Changed on 1 February 2026
When GST 2.0 moved most goods to a two-slab 5% / 18% structure on 22 September 2025, tobacco and pan masala were deliberately kept out of that transition. They continued on the old 28% + Compensation Cess regime until the cess loans were cleared. From 1 February 2026 the government switched them to a new structure.
Until 31 Jan 2026 (old regime)
- 28% GST — the erstwhile top slab
- GST Compensation Cess on top (product-wise)
- NCCD retained on cigarettes
- Cess funded state compensation loans
From 1 Feb 2026 (current)
- 40% GST — the demerit / sin-goods rate
- Additional excise duty on tobacco
- Health & National Security Cess on pan masala
- Compensation Cess discontinued
Moving from 28% to 40% GST looks like a big jump, but the reform replaced the Compensation Cess with an additional excise duty / HSNS cess so that the overall tax incidence on consumers stays broadly unchanged. The change is mainly structural — how the tax is levied and where the revenue is booked.
Manufacture, distribute or retail tobacco? Get your rates & invoicing re-checked for the new regime.
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Additional Excise Duty & HSNS Cess
The 40% GST is only part of the picture. Two separate levies replaced the Compensation Cess from 1 February 2026:
- Additional excise duty (tobacco): on cigarettes it ranges from about ₹2,050 to ₹8,500 per 1,000 sticks depending on length, and it also applies to chewing tobacco, zarda, hookah and other tobacco products.
- Health & National Security (HSNS) Cess (pan masala): a new levy on pan masala and gutkha, computed on a capacity / weight basis (pouch weight and rated machine capacity), not simply on value.
- These are levied over and above the 40% GST and are collected at the manufacturer stage.
- The old GST Compensation Cess on tobacco and pan masala was discontinued from the same date.
How the GST Adds Up
40% Cigarette / pan masala (value ₹100)
18% Bidis (value ₹100)
The excise duty and HSNS cess are quantity-/capacity-based, so the effective rupee burden per pack depends on the product, its length or weight and the machine capacity — not just the value. Use our GST calculator for the GST portion.
Input Tax Credit on Tobacco
Businesses in the tobacco supply chain can claim Input Tax Credit on the GST paid on genuine business inputs, subject to the usual conditions. The extra levies, however, follow their own rules.
| Item | ITC? | Reason |
|---|---|---|
| GST on raw tobacco, packaging, machinery, services | Yes | Normal B2B ITC for taxable tobacco output |
| GST charged by a wholesaler to a retailer | Yes | Set off against output GST on resale |
| Additional excise duty on tobacco | No | Excise levy — not creditable under GST |
| Health & National Security Cess (pan masala) | No | Separate cess — outside the GST credit chain |
Tobacco products cannot be dealt in under the composition scheme — they must be taxed under regular GST.
Tobacco GST Compliance Checklist
Tobacco is a high-scrutiny sector with special procedures (e.g. registration of packing machines for pan masala). A typical compliance picture:
- GST registration (GSTIN)
- Correct HSN & 40% / 18% classification
- Additional excise duty compliance
- HSNS cess (pan masala)
- Packing-machine registration
- Tax invoice with correct rate
- GSTR-1 (outward supplies)
- GSTR-3B (monthly)
- ITC reconciliation
- E-invoicing / e-way bill
- GSTR-9 annual return
- Books & records upkeep
The 28% → 40% headline change means every invoice template, ERP tax code and price list touching tobacco or pan masala had to be updated from 1 February 2026. If any of your masters still show 28% + compensation cess, you are billing on a superseded regime — fix it before your next return.
- GST rates & notifications: gst.gov.in
- CBIC-GST portal: cbic-gst.gov.in
- GST Council: gstcouncil.gov.in
- Sin-goods 40% slab & new levies effective 1 Feb 2026 (additional excise duty on tobacco; Health & National Security Cess on pan masala; Compensation Cess discontinued)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.