Archive · 28 Jan 2026
Cigarette Industry Faces Volume Contraction
The cigarette industry in India is expecting a decrease in sales by 6-8% next year because of new taxes.
The government has increased the excise duty on cigarettes and also raised the GST rate.
This means cigarettes will become more expensive.
Companies that make cigarettes will try to pass some of these costs to customers, but they might absorb some of the costs to keep prices lower for budget-conscious buyers.
Even with these challenges, the industry is expected to remain financially strong.
The domestic cigarette industry expects a 6-8% volume contraction in the next fiscal due to additional excise duties and increased GST rates.
From February 1, the compensation cess component will be removed, and an additional excise duty will be levied based on the length of the cigarettes.
Mid to premium cigarettes will see higher duty hikes, while mass segment cigarettes will have lower duty hikes but manufacturers may partially absorb the costs.
The earnings before interest and taxes (EBIT) margin is likely to decline by 200-300 basis points but will remain healthy.
Manufacturers have adequate financial flexibility for continued product innovation, aided by debt-free balance sheets and a cash surplus of more than Rs 20,000 crore.
- Who
- Domestic cigarette industry and manufacturers
- What
- Volume contraction due to additional excise duties and increased GST rates
- When
- Next fiscal year
- Where
- India
- Why
- Imposition of additional excise duties and increase in GST rates from February 1
- Volume Contraction
- 6-8%
- Excise Duty Increase
- Rs 2.05 to Rs 8.5 per stick
- GST Rate
- 40%
- EBIT Margin Decline
- 200-300 basis points
- Industry EBIT Margin
- Over 58%
- Manufacturers' Financial Flexibility
- Debt-free balance sheets and cash surplus of more than Rs 20,000 crore
Sources
Naidu Assures Tobacco Farmers to Intervene With Centre
Hoarding of tobacco products hits consumers hard
Cigarette industry bracing for 6-8% volume contraction post additional excise duty levy: Crisil
