Cigarette prices jump sharply after excise duty hike in Union Budget

Cigarette prices across India have risen sharply after the government increased excise duty on tobacco products in the Union Budget 2026–27. Distributors say prices of cigarettes have gone up by at least ₹22 to ₹25 per pack of 10 sticks, with premium brands now costing as much as ₹55 per pack.

Although wholesale markets remained closed on Sunday, distributors confirmed that billing at the new prices has already begun. Fresh stocks carrying the revised maximum retail price (MRP) are expected to reach shops from Monday, bringing the higher prices into full effect for consumers.

How prices have changed

According to distributors, premium cigarettes measuring 76 mm in length will now be sold at prices ranging between ₹50 and ₹55 per pack of 10 sticks. The exact price depends on the brand. This marks a significant increase compared to earlier rates, making cigarettes much more expensive overnight.

Manufacturers have not yet officially declared the new MRPs. Despite this, distributors have already started billing retailers for existing stock at the revised prices. These bills are being issued under the new tax structure, with 40 per cent goods and services tax (GST) applied.

Since wholesale markets were shut on Sunday, physical movement of goods was limited. However, distributors expect fresh stock with updated MRPs to start entering the market from Monday. They also believe that manufacturers will supply fully updated cigarette packs by the end of this month.

Some companies have reportedly paused the release of their stocks. A stockist said that certain manufacturers have put their supplies on hold and will only release them after completing billing under the new tax rules. This temporary pause may create short-term supply gaps in some areas.

For consumers, the impact will be immediate. Retailers are likely to sell existing stock at higher prices, even before new packs with revised MRPs arrive. As a result, smokers may find cigarette prices rising sharply at neighbourhood shops over the coming days.

Concerns of distributors and retailers

While the government’s move aims to increase revenue and discourage smoking, distributors and retailers have raised serious concerns about the possible side effects of the steep price hike. One major worry is the increased risk of smuggling and counterfeit cigarettes entering the market.

The All India Consumer Products Distributors Federation (AICPDF) warned that higher taxes on legal tobacco products could push consumers towards illegal alternatives. These include smuggled cigarettes and fake brands that do not meet safety standards and are sold without paying taxes.

According to AICPDF, there are around 8,000 to 9,000 stockists dealing in cigarette and tobacco products across India. The organisation claims to represent more than 4.5 lakh distributors and over 1.3 crore general stores and retail outlets nationwide.

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The federation said that traditional small retailers are already under pressure due to rising costs and competition from online and e-commerce platforms. Tobacco products, they said, are among the few remaining categories where small, brick-and-mortar shops still earn steady income.

AICPDF president D Patil said that pushing legal tobacco products out of reach through high taxation could damage honest retailers. He warned that if cigarettes move into the hands of illegal networks, small shopkeepers will suffer the most.

“This is not just about taxation, it is about survival,” Patil said, adding that many small stores depend on cigarette sales to maintain daily cash flow. If legal sales decline, these shops may struggle to stay afloat.

Distributors also fear that consumers may switch to cheaper, unregulated products if legal cigarettes become too expensive. This could defeat the purpose of taxation while also creating public health risks due to poor-quality counterfeit products.

At the same time, retailers are confused due to the delay in official MRP declarations by manufacturers. Selling old stock at new prices without updated packaging could also lead to disputes with customers, especially in price-sensitive areas.

Despite these concerns, distributors expect the market to stabilise once new stocks with printed MRPs arrive. Until then, prices may vary slightly between regions and retailers.

The excise duty hike on cigarettes is part of the government’s broader strategy to raise revenue and discourage the use of harmful products. However, how consumers respond to the price jump and how it affects legal sales, smuggling, and small retailers will become clearer in the weeks ahead.