Smokers and chewers in India, brace yourselves: cigarettes, beedis, pan masala, and other tobacco products are set to become significantly more expensive starting February 1. The government has rolled out a major tax overhaul, replacing the GST compensation cess with steeper rates and fresh levies to boost revenue and public health efforts.

In a notification following two key bills passed by Parliament last month, the GST on pan masala, cigarettes, gutkha, and chewing tobacco will climb to 40%, while beedis face an 18% rate. Adding to the pinch, a new Health and National Security Cess targets pan masala production based on machine capacity, and additional excise duties hit tobacco manufacturing. This shift ensures states don't lose out on funds as the old cess expires, with tobacco taxes already contributing over ₹50,000 crore annually to the exchequer.

Markets felt the heat immediately, with shares of ITC tumbling up to 8% and Godfrey Phillips plunging 10% in early trading on New Year's Day. Industry watchers predict pack prices could surge 50-60%—think ₹10-20 extra for a standard cigarette pack—potentially curbing consumption amid India's 1.3 million annual tobacco-related deaths.

Finance Ministry officials frame the move as a dual win for health and national security funding, aligning with WHO calls for heavy "sin taxes." However, concerns linger over impacts on rural beedi workers in states like Uttar Pradesh and Karnataka, plus risks of smuggling if prices soar too high. Stay tuned for consumer reactions and any tweaks as the deadline nears.