With the Union Budget 2026-27, the government has delivered a significant blow to tobacco users. Finance Minister Nirmala Sitharaman introduced a new tax structure on cigarettes and other tobacco products, effective immediately from February 1, causing prices across all categories to rise sharply.
Previously, cigarettes were taxed under a 28% GST plus compensation cess system, in place since 2017. This system has now been scrapped and replaced with a new three-layer taxation framework, popularly called the “tax triangle.”
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Under the new regime, cigarette prices will include:
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A fresh excise duty
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A Health and National Security cess
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GST increased by 40%
Impact on cigarette Prices
Cigarettes that previously cost around Rs 10 per stick have become more expensive. With the new excise duty of roughly Rs 2–3 per cigarette, prices have jumped to around Rs 12–13 per stick.
For packs, the increase is more noticeable. A 10-stick pack that earlier sold for about Rs 100 now costs approximately Rs 130–140, depending on the brand and retailer.
The tax hike varies by cigarette length, with longer and premium variants facing steeper increases:
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65–70 mm cigarettes: Rs 3.6–4 extra per stick
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70–75 mm cigarettes: around Rs 5.4 extra per stick
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Non-standard or designer cigarettes: up to Rs 8.50 more per stick
Market analysts estimate that some cigarettes previously priced at Rs 15–18 per stick could rise to as much as Rs 70–72 once the full tax impact is reflected in retail prices.
The government’s clear objective behind this sharp increase is to discourage cigarette and tobacco use, particularly among young people and first-time users, by making products less affordable.