Union Budget 2026: ₹18 Cigarette Stick May Cost Much Higher After Stricter Tobacco Tax

New Delhi: The Union Budget 2026–27 has brought a sharp tightening of taxes on tobacco and related products, marking a decisive shift in the government’s sin tax strategy. Cigarettes, gutkha, paan masala or chewing tobacco have all become significantly more expensive from February 1, 2026, following a major overhaul of excise duties and cess structures.

The move is aimed at discouraging consumption of harmful products and strengthening public health outcomes, while also safeguarding government revenues as older, temporary tax mechanisms are phased out.

Under the new framework, tobacco products face additional excise duties and a newly structured Health and National Security Cess, over and above the existing Goods and Services Tax. This marks one of the most aggressive anti-tobacco tax pushes in recent years.

Sin tax regime tightened across tobacco products

A key change is the amendment to the Seventh Schedule of the Finance Act, 2001, revising the National Calamity Contingent Duty (NCCD) rates with effect from May 1, 2026.

1. Chewing tobacco: NCCD raised from 25 per cent to 60 per cent
2. Jarda-scented tobacco: NCCD raised from 25 per cent to 60 per cent
3. Other tobacco products: NCCD raised from 25 per cent to 60 per cent

However, the government has clarified through a notification that the effective duty rate will remain at 25 per cent, ensuring continuity in the overall tax burden while restructuring the levy framework.

Premium or non-standard designs: up to Rs 8.50 per stick

Industry experts expect manufacturers to pass on the higher tax burden to consumers. A cigarette pack that earlier sold for around Rs 18 could now cost Rs 70 to Rs 72, depending on the variant.

Cigarette prices set to climb sharply

Cigarette taxation has now become more granular, based on length, filter type and design, making smoking significantly more expensive across categories.

1. Short non-filter cigarettes up to 65 mm: around Rs 2.05 excise per stick
2. Short filter cigarettes up to 65 mm: around Rs 2.10 per stick
3. Medium-length cigarettes: around Rs 3.6 to Rs 4 per stick
4. Long cigarettes: around Rs 5.4 per stick

Relief for green fuel blending

Alongside higher sin taxes, the Budget has offered relief to cleaner fuel initiatives. The value of biogas or compressed biogas contained in blended compressed natural gas will now be excluded from the transaction value for calculating central excise duty.

This means that the central, state or integrated taxes already paid on biogas or CBG will not be counted again while computing excise duty on blended CNG, a move aimed at encouraging sustainable energy use.

A historic Budget day in Parliament

Budget 2026–27 is also historic for procedural reasons. It is the first Union Budget in India’s history to be presented on a Sunday, underlining the government’s insistence on maintaining the February 1 presentation timeline.

Finance Minister Nirmala Sitharaman delivered her ninth consecutive budget speech, clocking in at 1 hour and 25 minutes, making it the third shortest budget speech on record.

The shortest budget speech remains that of Hirubhai Mulljibhai Patel in 1977, at around 800 words, while the longest was delivered by Nirmala Sitharaman herself in 2020, lasting over two hours and forty minutes.

Ahead of the presentation, President Droupadi Murmu offered the customary dahi-cheeni to the finance minister, a symbolic gesture of good luck.

Economic Survey and Budget team

The budget presentation followed the tabling of the Economic Survey 2025–26 in the Lok Sabha and the formal inauguration of the budget session by the president.

The finance minister was assisted by a core team of senior bureaucrats, including Anuradha Thakur, Economic Affairs Secretary; Arvind Shrivastava, Revenue Secretary; Vumlunmang Vualnam, Expenditure Secretary; M Nagaraju, Financial Services Secretary; Arunish Chawla, DIPAM Secretary; and K Moses Chalai, Secretary, Department of Public Enterprises.