VIJAYAWADA: The Andhra Pradesh government has welcomed the Centre’s decision to reduce excise duty on unbranded raw tobacco products to zero.
Chief Minister N Chandrababu Naidu said the move would directly benefit tobacco farmers and small traders across the State. He described the notification issued by the Union Finance Ministry as a significant step that would bring relief to cultivators, and ensure better prices for their produce.
The gazette notification clarified excise duty rules under HS Code 2401, which covers unprocessed tobacco. According to the new guidelines, retail sales of unbranded, unpackaged tobacco will now attract zero excise duty, while branded and packaged tobacco products will continue to be taxed at 18%. The changes will bring uniformity, transparency, and clarity to tobacco taxation, eliminating past ambiguities that often caused disputes and losses for farmers and traders.
Naidu noted that the new system would also curb tax evasion, and prevent misuse of raw tobacco sales under branded retail categories. The AP government has urged the Centre, and the Central Board of Indirect Taxes and Customs to enforce the notification uniformly across the country.
The revised excise duty structure came into effect on February 1, 2026. Under the new rules, unbranded raw tobacco sold in bulk bags by farmers will attract zero excise duty, while branded and packaged tobacco products, including small retail pouches and company-labelled bags, will continue to be taxed at 18%. State officials emphasised that the changes will ease the tobacco supply chain, while safeguarding government revenue from commercial sales.
The government believes the decision will provide direct relief to farmers and small traders, while ensuring fair taxation of branded retail products. The clear classification will reduce disputes during auditing and billing, and that farmers who sell bulk tobacco will now be free from excise duty.