GST on Pan Masala and Tobacco in India: Rates & Rules

The tax on tobacco in India has always been multi-layered, but February 1, 2026 brought the most significant restructuring this sector has seen in years. GST on pan masala, cigarettes, gutkha, and most manufactured tobacco products now stands at a flat 40%, making it the highest GST slab ever applied to any goods category in India's indirect tax system. 

For manufacturers, distributors, wholesalers, and retailers dealing in these products, this is not a small update. The valuation method has changed, new levies have been introduced, and old ones have been removed. Understanding all of it is critical to staying compliant.

What is the Current GST on Cigarettes and Tobacco in India?

Effective February 1, 2026, the current GST on cigarettes in India is 40%. This applies to all cigarettes and cigars covered under HSN 2402, regardless of length or filter type. The same 40% rate applies to pan masala (HSN 2106 90 20), unmanufactured tobacco excluding leaves (HSN 2401), and other manufactured tobacco products under HSN 2403, which includes chewing tobacco, gutkha, zarda, and similar items.

This change was notified through Central Tax (Rate) Notification No. 19/2025, dated December 31, 2025, and was recommended by the 56th GST Council meeting held in New Delhi on September 3, 2025.

One important exception: Bidis (biris) are now taxed at 18% GST, reduced from the earlier 28%. This concession reflects the economic reality that bidi workers and consumers largely fall in lower-income brackets.

GST Rate Table & HSN Code: Tobacco and Pan Masala Products (Effective Feb 1, 2026)

Tax Structure For Tobacco Products

Here is how the layers of tax apply to tobacco products from February 1, 2026:

For Cigarettes:

• 40% GST (on RSP basis)
• Central Excise Duty (Rs. 2,050 to Rs. 8,500 per 1,000 sticks depending on length)
• NCCD (25% on RSP after 55% abatement)

For Pan Masala:

• 40% GST (on RSP basis)
• HSNS Cess (machine-capacity based, applied at factory level)

For Bidis:

• 18% GST
• NCCD continues to apply

One aspect of some relief is that businesses in this sector can still claim Input Tax Credit (ITC) on raw materials, packaging, flavouring agents, and processing equipment. This partially offsets the cost burden of the higher GST rate.

Conclusion

The 2026 restructuring of GST on pan masala and tobacco marks a clear policy direction: higher taxation, tighter valuation controls, and purpose-driven levies. The shift to a 40% rate on RSP, the abolition of the compensation cess, the reintroduction of central excise duty, and the new HSNS Cess on pan masala collectively represent the most comprehensive overhaul of this sector's tax structure since the GST rollout in 2017.

Discover Similar Topics Like This

GST Rates on Freight Charges
GST Rates on Silver
GST Rates on Gold Jewellery
GST Rates on Clothing

FAQs: GST on Pan Masala and Tobacco in India

1. What is the current GST on cigarettes in India?

The current GST on cigarettes in India is 40%, effective February 1, 2026. This rate applies to all cigarettes and cigars under HSN 2402, as per Central Tax (Rate) Notification No. 19/2025. In addition to GST, central excise duty and NCCD are also applicable.

2. What is the GST on pan masala?

GST on pan masala is 40% from February 1, 2026. Pan masala (HSN 2106 90 20) packaged in pouches, tins, or containers also attracts the Health and National Security (HSNS) Cess over and above the 40% GST.

3. What is the GST rate on tobacco products in India?

The tobacco GST rate in India is 40% for most products, including cigarettes, gutkha, chewing tobacco, zarda, and manufactured tobacco substitutes. Bidis (biris) are an exception, taxed at 18% GST.

4. What is the HSNS Cess on pan masala?

The Health Security and National Security (HSNS) Cess is a new levy on pan masala introduced from February 2026. It is calculated based on the weight of pouches and the rated capacity of machines in the factory. The revenue from this cess is earmarked for healthcare infrastructure and national security purposes.

5. What is the GST rate on gutkha?

GST on gutkha is 40%, effective February 1, 2026. Gutkha falls under HSN 2403 as a manufactured tobacco product. The RSP-based valuation system also applies to gutkha.

6. Are bidis (biris) taxed at the same rate as cigarettes under GST?

No. Bidis are taxed at 18% GST, which is lower than the 40% applicable to cigarettes. 

7. Can businesses claim Input Tax Credit (ITC) on tobacco products?

Businesses manufacturing or trading tobacco products can claim ITC on eligible inputs such as raw materials, packaging materials, flavouring agents, and processing equipment. However, ITC is not available on products where it is specifically blocked under the GST law.

About the author

Mehul Jagwani

View Profile

Mehul is a seasoned content writer with a passion for simplifying complex accounting and GST topics. With a keen interest in entrepreneurship and business management, he specializes in creating informative and engaging content for themunim.com. His goal is to help businesses understand and implement accounting and GST software solutions effectively. When he's not crafting content, Mehul enjoys exploring new places and spending time with his Golden Retriever.