Union Finance Minister Nirmala Sitharaman speaks in the Lok Sabha during the winter session of Parliament in New Delhi on December 3, 2025. Photo: Sansad TV via PTI Photo
Finance Minister Nirmala Sitharaman on Wednesday (Dec 3, 2025) clarified that the tax hike she proposed on cigarettes was not a cess but a consumption tax that would be part of a divisible pool of taxes shared with states.
The Lok Sabha on Wednesday (December 3) passed the Central Excise (Amendment) Bill, 2025.
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In her reply to the debate on the bill in the Lok Sabha, Ms. Sitharaman said the duty on cigarettes was higher in the pre-Goods and Services Tax (GST) regime. It was then reduced to a ‘nominal’ rate under GST as cigarettes also attracted countervailing cess.
Since this compensatory foreclosure will soon be lifted once the government repays the interest on the loans it took to compensate the states during the COVID-19 pandemic period, the Center introduced this bill to increase the basic excise duty on cigarettes so that the tax burden does not fall on them.
“This is not a new law, it is not an additional tax or something that the Center is taking away,” Ms Sitharaman said. “Many MPs here have commented that it is cess. It is not cess; it is excise duty. Excise duty existed before GST. The amount will be redistributed to the states as per the recommendations of the finance commission.”
The finance minister also sought to respond to concerns raised by some MPs that the new tax would increase the price of beedi and hurt millions of beedi workers in the country.
“There is no change in the tax impact on beedi,” clarified Ms. Sitharaman. “Not a single tax levy has been raised.”
She went on to highlight the various schemes and programs the government has to help beedi workers such as health facilities, housing subsidies and scholarships for studies.
The finance minister also talked about how tax rates on tobacco were increasing every year in the pre-GST era and how tobacco farmers had to give up tobacco cultivation.
“Efforts have been and continue to be made in the past to raise awareness among farmers about the dangers of tobacco cultivation,” she explained. “Under the National Agricultural Development Plan, the crop diversification program covers 10 major tobacco-producing states – Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, Odisha, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal – since 2015, and other efforts have been ongoing for decades.
She said between 2018 and 2021-22, more than 1.12 million acres of land had been shifted from tobacco cultivation to other crops.
Published – 03 Dec 2025 19:55 IST
