Finance Minister Nirmala Sitharaman assured on Wednesday that states will also get the share from the excise collected from tobacco items and the rates on bidis have been kept unchanged to ensure that there is no impact on the livelihood of the bidi makers and the related work force. Lok Sabha passed the Central Excise Amendment Bill, 2025 on Wednesday.
'This excise is not a cess, it is a duty that goes into divisible pool. This collection will go into the divisible pool and then 41% will be reaching the states, " Sitharaman said during her address at the Lol Sabha on Wednesday.
She further clarified that the states need to be assured that the Centre will be beside them and there will be no dearth of capital for the states. As highlighted by the Minister that "no states get lesser".
The minister also said that states have asked for a 50% share in central taxes but added this is for the Finance Commission to decide.
Responding to opposition's criticism regarding the impact of the excise duty on tobacco producers like farmers, she asserted that several crop diversification programmes are already in place and the government will take more such programmes to ensure that the tobacco farmers get to cultivate other crops, so that their income gets unaffected.
Citing examples from tobacco farming states such as Andhra Pradesh, Telengana and Odisha, she said that a large chunk of the tobacco farmers from these states have been able to diversify from tobacco farming to sugarcane, millets and other crop production. Moreover, there will be no impact on the bidi makers and workers too, a large chunk of whom come from lower economic background and are mostly small and micro enterprises.
"There is no change in tax incidence on bidi. Bidi was not taken to 40%, as it will be hurtful. Although health consideration warrants it to be in 40%. Now when are bringing it to the excise regime, it will be taxed similar to what it was earlier. There will be no impact on the income of the bidi workers, as the rates have remained unchanged even after the excise duty," the Minister informed the Parliament.
Excise Amendment Bill, 2025 aims to replace the GST compensation cess which is currently levied on all tobacco products like cigarette, chewing tobacco, cigar, hookah, zarda, and scented tobacco. Currently, a 28% GST plus cess at varied rate is levied on tobacco.
“In order to ensure that the incidence is not lower than what it was during GST with the compensation cess, we are bringing this excise. In a way we are saying cigarettes should not become affordable now because incidence has become lesser,” added Sitharaman.