Smokers’ Pockets To Feel The Burn? Cigarette Supply Disruptions Rattle Markets Ahead Of New Excise Regime Due February 1
Several cities are facing shortages of cigarettes and tobacco as irregular supplies disrupt markets, leaving brands unavailable or sold at higher prices before the hike.
Published : January 6, 2026 at 5:02 PM IST
New Delhi: Cigarettes and other tobacco products will become more expensive from February 1, 2026, but the effects are already being felt in the market. Several cities, including the national capital, are experiencing shortages of cigarettes and tobacco products, with shopkeepers saying companies and distributors are not consistently delivering. As a result, popular brands are either missing or being sold at higher prices before the official price hike.
Retailers say the disruption is driven by anticipatory stockholding ahead of the government’s decision to overhaul the excise duty regime. From February 1, a new excise duty structure will come into force, adding to the existing GST of up to 40 per cent on tobacco products.
This has led wholesalers and large dealers to hold back on inventory, selling it later at higher prices. According to a Delhi retailer, “Those with existing stock have slowed supplies so they can benefit from higher post-hike prices.”
Why Prices Are Rising Ahead Of February 1?
The Finance Ministry has notified a comprehensive revision of excise duties—the first major change since the introduction of GST in 2017. Under the revised framework, cigarettes will attract an additional excise duty ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on length and category, in addition to GST.
This dual levy (excise plus GST) significantly raises the tax burden and is expected to push up retail prices across segments, especially longer and filter cigarettes.
At the same time, the Central Government has withdrawn the GST Compensation Cess on tobacco products (reducing it to zero) and rationalised the GST slabs to 18 per cent or 40 per cent (removing the 28 per cent slab).
Despite this, the reintroduced specific excise, unchanged for nearly seven years, more than offsets the relief, leading to net price increases. The Supreme Court of India has previously upheld the dual taxation structure.
Smokeless Tobacco To Get Costlier Too
Prices of smokeless tobacco, such as chewing tobacco, jarda, and gutkha, are also expected to rise with the rollout of capacity-based excise under the Packing Machines Rules, 2026. Products will be taxed based on the number, speed, and output capacity of packing machines, as well as the retail sale price. The government says this aims to curb tax evasion in highly mechanised, cash-driven segments.
What Consumers Are Seeing Now
Though official prices apply from February 1, retail rates have already climbed by Rs 2-Rs 5 in many places due to supply tightness:
- Rs 10 cigarette: now Rs 12-13
- Rs 15 cigarette: now Rs 18-19
- Rs 18 cigarette: now Rs 21-22
- Rs 20 cigarette: now Rs 23-25
Shopkeepers say prices could rise further as the deadline approaches and supplies don’t return to normal.
Government’s Rationale
According to the Ministry of Finance, the revised tax structure aligns India’s tobacco pricing with global public health recommendations, which call for regular increases in specific excise to counter inflation and rising incomes.
Officials also cite growing healthcare costs from tobacco-related illnesses and long-standing revenue leakages in the sector.
All changes take effect from February 1, 2026, giving manufacturers and distributors a short transition period.
However, unless stockholding eases and supplies stabilise, consumers may continue to face higher prices and shortages even before the official rollout.
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