Budget 2016: Cigarettes to get costlier as Jaitley hikes excise rates

Finance minister Arun Jaitley announced in the Union budget on Monday an increase of 10 to 15% in the excise duty on tobacco items, including cigarettes, cigars, cheroots and cigarillos.

Smokers should gear up to kick the butt. Or be prepared to shell out more.

The duty hikes follows the tradition of previous governments when smokers were regularly targeted in a bid to shore up revenues while dis-incentivising the habit (Mohd Zakir/HT Photo)

Finance minister Arun Jaitley announced in the Union budget on Monday an increase of 10 to 15% in the excise duty on tobacco items, including cigarettes, cigars, cheroots and cigarillos.

While it proposed a 38 paise per unit increase of excise duty for cigars, cheroots, tobacco substitutes and cigarillos, the duty on Gutkha, chewing tobacco, and jarda, scented tobacco, was increased by 11%.

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For cigarettes, filtered and non-filtered, the government also increased the additional duty of excise by 14 paise to 38 paise per stick.

Following the announcement, industry leader ITC’s share price tanked by 6.9% to Rs 269.9 at share but recovered later.

The duty hikes in this year’s budget follows the tradition of previous governments when smokers were regularly targeted in a bid to shore up revenues while dis-incentivising the habit.

The one tobacco product that did not attract any increase, however, was beedi — largely consumed by lower income groups in smaller towns and villages of India.

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In India, cigarettes are taxed based on their length rather than the price.

While only 11% of total tobacco is consumed in the form of legal cigarettes in India, they contribute 87% of the excise revenue from tobacco, according to industry lobby Tobacco Institute of India.