With the presentation of Union Budget 2026-27, the government has delivered a major blow to tobacco users. Finance Minister Nirmala Sitharaman announced a new tax framework on cigarettes and other tobacco products, which came into effect immediately from February 1. The result: cigarette prices across all categories have risen sharply.
Until now, cigarettes were taxed under a system that included 28% GST along with a compensation cess , a structure that had been in place since 2017. This system has now been scrapped.
Under the new regime, cigarettes will face a combination of:
This three-layer structure, being referred to as a “tax triangle,” has pushed prices up rapidly across the board.
Cigarettes that earlier cost around Rs 10 per stick are now significantly more expensive. A new excise duty of roughly Rs 2 to Rs 3 per cigarette has been added, taking the price to about Rs 12-13 per stick.
The impact is even more noticeable when buying a full pack. A 10-stick pack that earlier sold for around Rs 100 will now cost approximately Rs 130-140, depending on the brand and retailer.
The tax hike has been structured according to cigarette length, with longer and premium variants seeing steeper increases:
Non-standard or designer cigarettes have been hit the hardest, with a tax increase of Rs 8.50 per stick.
Market estimates suggest that some cigarette variants previously priced at Rs 15-18 per stick could rise to Rs 70-72 once the new taxes are fully passed on to consumers.
The government’s intent behind this sharp increase is clear: by making cigarettes and tobacco products more expensive, it aims to curb consumption, especially among young people and first-time users.
