GST Rate Changes in the Tobacco Sector – 56th GST Council
Meeting
The 56th meeting of the
GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman, was
held on 3rd September 2025 at Sushma Swaraj Bhavan, New Delhi. Among the key
highlights, the Council made major recommendations for the tobacco sector, balancing
the interests of rural workers engaged in bidi production with the government’s
objective of discouraging tobacco consumption.
1. Reduction in GST Rates
(From 18% to 5%)
|
S.
No.
|
Chapter/Heading/
Sub-heading/ Tariff Item
|
Description
of Goods
|
Old
Rate
|
New
Rate
|
|
1
|
1404
90 10
|
Bidi
wrapper leaves (tendu)
|
18%
|
5%
|
|
2
|
1404
90 50
|
Indian
katha
|
18%
|
5%
|
Reduction in GST on Bidi
(From 28% to 18%)
|
S.
No.
|
Chapter/Heading
|
Description
of Goods
|
Old
Rate
|
New
Rate
|
|
1
|
2403
|
Bidi
|
28%
|
18%
|
Increase in GST on Other
Tobacco Products
(From 28% to 40%)
|
S.
No.
|
Chapter/Heading/
Sub-heading/ Tariff Item
|
Description
of Goods
|
Old
Rate
|
New
Rate
|
|
1
|
2401
|
Unmanufactured
tobacco; tobacco refuse [other than tobacco leaves]
|
28%
|
40%
|
|
2
|
2402
|
Cigars,
cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
|
28%
|
40%
|
|
3
|
2403
|
Other
manufactured tobacco and substitutes; “homogenised” or “reconstituted”
tobacco; tobacco extracts and essences
|
28%
|
40%
|
|
4
|
2404
11 00
|
Products
containing tobacco or reconstituted tobacco and intended for inhalation
without combustion
|
28%
|
40%
|
|
5
|
2404
19 00
|
Products
containing tobacco or nicotine substitutes and intended for inhalation
without combustion
|
28%
|
40%
|
Summary Insight
- Inputs for bidi industry (tendu
leaves, Indian katha) – rate reduced to 5%
- Finished bidi products – rate reduced
to 18%
- All other tobacco products (including
cigarettes, cigars, e-tobacco products, and substitutes) – rate increased
to 40%
Implementation Timeline
- For cigarettes, chewing tobacco,
zarda, unmanufactured tobacco, and bidi → the current GST rate +
Compensation Cess continues for now.
- The new rates will be implemented
later, once the loan and interest liabilities related to the Compensation
Cess are fully discharged.
Conclusion
The Council has taken a balanced
policy approach:
- Relief for bidi industry and rural
employment through reduced GST on raw materials
and bidi.
- Higher tax burden on cigarettes,
cigars, and other harmful tobacco products,
aligning with the health and revenue objectives of the government.
This dual move is
expected to safeguard livelihoods while continuing to discourage
tobacco consumption across the country.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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