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FM Nirmala Sitharaman says higher prices or taxes on tobacco products are intended to act as a deterrent so that people would not get into the habit.
Finance Minister Nirmala Sitharaman replies to the discussion on the Central Excise (Amendment) Bill, 2025, in the Lok Sabha.
Finance Minister Nirmala Sitharaman on Wednesday said higher prices or taxes on tobacco products are intended to act as a deterrent so that people would not get into the habit. She said that even before the GST regime, tobacco rates were increased annually. The finance minister said this during her reply to the discussion on the Central Excise (Amendment) Bill, 2025, in the Lok Sabha.
The bill seeks to revise excise duties on tobacco and related products after the GST compensation cess, currently levied on ‘sin goods’ such as cigarettes, chewing tobacco and nicotine-based items, expires next year.
“Even in India, prior to GST, tobacco rates were increased annually. This was primarily due to health-related concerns, as higher prices or taxes were intended to act as a deterrent so that people would not get into the habit,” Sitharaman said during her reply.
The proposed legislation is part of a broader tax restructuring exercise around tobacco and pan masala. On Monday, Sitharaman introduced two bills that aim to maintain a high tax burden on these products while repurposing the levy structure.
The Central Excise (Amendment) Bill, 2025 proposes a new excise duty framework for tobacco products, ensuring continued revenue once the compensation cess lapses. Separately, the Health Security se National Security Cess Bill, 2025, seeks to impose a cess on pan masala and other notified goods, with proceeds earmarked for healthcare and national security initiatives.
The shift is designed to ensure that the effective tax incidence on demerit goods remains unchanged even after the cessation of the cess, which was originally introduced alongside the rollout of GST in 2017 and later extended to cover Covid-related liabilities.
Defending the policy approach, Sitharaman emphasised the need to sustain deterrence-based taxation on harmful products. Opposition members raised objections during the debate, with some of them questioning lack of health warnings in the bill and others saying the cess-based collections are not shared with states.
Debate on the bill is expected to continue this week as the government seeks passage of key tax measures ahead of the phase-out of the cess by March 2026.
Click here to add News18 as your preferred news source on Google. December 03, 2025, 18:10 IST
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