Parliament Passes Bill to Raise Tobacco Duties

Parliament Approves Bill Increasing Tobacco Excise Duties

Why in the News?

The Parliament has passed the Central Excise (Amendment) Bill, 2025, raising excise duties on various tobacco products to reduce consumption and align with WHO health benchmarks. The Bill seeks to strengthen public health while ensuring revenue stability and farmer protection, with an added focus on environmental considerations and the need for environmental clearances in the tobacco industry.

Parliament Passes Bill to Raise Tobacco Duties

Key Features of the Central Excise Amendment Bill:

  • The Bill amends the Central Excise Act, 1944 to allow for large increases in duties on cigarettes, cigars, hookah tobacco, chewing tobacco and scented tobacco, while also addressing the need for environmental impact assessments in tobacco production.
  • Duties on cigarettes will rise sharply from the current ₹200–₹735 per 1,000 to ₹2,700–₹11,000 per 1,000, with manufacturers required to comply with ex post facto environmental clearances.
  • Several tobacco products will see steep hikes: chewing tobacco from 25% to 100%, hookah tobacco from 25% to 40%, and smoking mixtures from 60% to 325%, all subject to stricter environmental regulations.
  • The purpose is to make tobacco products less affordable, addressing India’s low tax incidence of 53%, far below the WHO benchmark of 75%, while also promoting a pollution free environment.
  • Minister of State for Finance Pankaj Chaudhary introduced the Bill; it has been approved by both Lok Sabha and Rajya Sabha, with considerations for environmental jurisprudence.

Government’s Stand and Parliamentary Debate

  • Finance Minister Nirmala Sitharaman clarified that excise duty—not cess—will be shared with states, ensuring fiscal stability and adherence to the polluter pays principle.
  • She assured the Bill will not harm tobacco farmers or beedi workers, citing crop diversification schemes and welfare programmes, while also mentioning compliance with the Forest Conservation Act.
  • Over 1.12 lakh acres have already shifted away from tobacco cultivation (2017–18 to 2021–22), with efforts to ensure environmental clearances for alternative crops.
  • Opposition concerns:
    • Congress flagged harm to farmers and demanded committee review, including environmental impact assessments.
    • TMC argued taxation alone won’t curb consumption and criticised ineffective regulation of pan masala ads, calling for stricter coastal regulation zone compliance for manufacturers.
    • AAP said excessive taxation is insufficient to reduce tobacco use, suggesting the integration of environmental democracy principles in policy-making.
  • Supporters like AIADMK called the Bill a timely step for public health, revenue consistency, and environmental protection.

About Tobacco Taxation and Public Health:
– WHO Framework Convention on Tobacco Control (FCTC) recommends a tax incidence of 75% or more to discourage consumption, aligning with the precautionary principle.
– India’s tobacco control laws include:
– COTPA, 2003 regulating advertising, packaging, and sale, with recent amendments considering environmental clearances.
– GST + Compensation Cess on cigarettes and tobacco products, factoring in environmental impact assessments.
– National Tobacco Control Programme (NTCP) for awareness and cessation, now incorporating environmental jurisprudence.
– Fiscal measures are globally recognised as the most effective tool to reduce tobacco consumption, especially among youth, while promoting a pollution free environment.
– Tobacco burden in India:
– Over 13 lakh deaths annually are linked to tobacco use, with significant environmental consequences.
– The economic cost of tobacco-related diseases is estimated at ₹1.8 lakh crore annually, not including environmental remediation costs.
– Heavy excise + GST framework ensures reduced affordability, aligning India with global best practices for public health protection and environmental sustainability, as outlined in the EIA notification.