Central Excise Bill raises tobacco duty rates, no new expenditure

The change is intended to provide fiscal space for the government to raise these duties once the compensation cess on these products is discontinued.

Who it concerns: Manufacturers, importers, and businesses dealing in tobacco, manufactured tobacco substitutes, and nicotine-containing products (including cigarettes, cigars, hookah tobacco, chewing tobacco, and e-cigarettes/vapes) that are subject to central excise duty.

What the bill does

• Substitutes the table of tariff rates in Section IV of the Fourth Schedule of the Central Excise Act, 1944.
• Increases excise duty rates for unmanufactured tobacco (e.g., from 64% to 70%).
• Increases excise duty rates for cigarettes, cigars, and cigarillos (e.g., filter cigarettes from Rs. 440-545 per thousand to Rs. 3000-7000 per thousand).
• Increases excise duty rates for hookah tobacco (from 25% to 40%) and chewing tobacco (from 25% to 100%).
• Increases excise duty rates for products intended for inhalation without combustion (e.g., from 81% to 100%).
• The Act comes into force on a date appointed by the Central Government via notification in the Official Gazette.

Also in the document

• The Bill states that the Central Excise Act, 1944 was largely repealed by the GST Act, 2017, except for tobacco and tobacco products listed under Entry 84 of List I of the Seventh Schedule to the Constitution.
• The Financial Memorandum states that the Bill will not involve any expenditure from the Consolidated Fund of India.
• The Statement of Objects and Reasons notes that compensation cess on tobacco will be discontinued once interest and loan liabilities are discharged, necessitating this amendment to protect tax incidence.