India, Jan. 25 -- On the final day of 2025, the government announced that effective February 1, 2026, tobacco products will attract an additional excise duty over and above the 40% GST rate. This new levy replaces the GST Compensation Cess imposed on such sin goods. The move is supposedly aimed at preserving high effective tax rates after the cess sunset, mobilizing resources for health and national security priorities, and deterring tobacco consumption through steeper taxation, particularly on cigarettes and pan masala.

Yet while the 40 percent GST rate is applied uniformly in principle, the accompanying duty hikes and structural redesign of the tax regime produce sharply uneven outcomes across tobacco categories. Premium and longer cig...