Tobacco products and pan masala products are set to face a new tax structure from February 1. This comes as the Centre rolls out additional excise duty and a health cess, above the current GST rates.

The new structure will replace the compensation cess which is applied on 'sin goods.'Tobacco and allied products will now attract an additional excise duty while pan masala will have a Health and National Security Cess. As per a government notification, pan masala, cigarettes, tobacco and similar products will be taxed at 40% under the Goods and Services Tax (GST) regime. Meanwhile, biris will attract an 18% GST rate.

These GST rates will continue, but new levies will now be imposed separately. The finance ministry also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026. The rules lay down the framework for determining production capacity and collecting duty from manufacturers of chewing tobacco and related products. The move follows Parliament’s approval in December of two Bills that cleared the way for the new cess on pan masala manufacturing and the excise duty on tobacco products. With the latest notification, the government has confirmed that the new levies will take effect from February 1, while the current GST compensation cess, levied at varying rates, will be discontinued from the same date.