The Federation of All India Farmer Associations (FAIFA) has called on the Union government to reconsider and roll back the recently notified excise duty rates on tobacco products, warning that the sharp increase could adversely affect farmers, disrupt the domestic supply chain, and encourage smuggling of illegal products.
In a statement issued on Friday, FAIFA urged the government to revise the excise structure to revenue-neutral levels, arguing that a stable and predictable taxation framework is essential to safeguard farmer incomes, protect employment across the tobacco value chain, and align fiscal policy with broader economic and public health objectives.
The appeal follows a notification issued by the Ministry of Finance titled “Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026.” Under the new rules, excise duties ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on cigarette length, will come into effect from February 1.
FAIFA said the steep hike would compel domestic manufacturers to raise retail prices of tobacco products, which could lead to a significant decline in sales. This, the association warned, would have a cascading impact on farmers by reducing demand for domestically grown tobacco, potentially resulting in excess supply and depressed farmgate prices in the near term.
According to FAIFA, the increase contradicts earlier assurances given by the government during the announcement of GST 2.0 in September 2025. The government had stated that tobacco products would attract GST at 40 per cent of the retail sales price, while the overall tax incidence would remain unchanged.
Murali Babu, President of FAIFA, said the farming community had welcomed the government’s move to rationalise GST rates and eliminate the 12 per cent slab, viewing it as a step that helped stabilise prices and provided clarity to the sector. He noted that farmers had relied on the assurance of revenue neutrality while planning production and supply.
FAIFA further pointed out that India’s legal cigarette prices are already among the least affordable globally when assessed against per capita income, as reflected in the World Health Organization’s affordability index. The association cautioned that further price increases could push a large section of consumers away from regulated markets towards illegal and unregulated channels.
Such a shift, FAIFA argued, would undermine lawful businesses and weaken compliance, while doing little to achieve intended public health outcomes. The association stressed that excessive taxation could inadvertently strengthen illicit trade networks, resulting in revenue losses for the exchequer and additional challenges for enforcement agencies.
Emphasising the need for balanced policymaking, FAIFA appealed to the government to ensure that tax measures do not disproportionately burden farmers and other stakeholders who operate within the legal framework. It reiterated that sustainable agriculture, employment security, and policy consistency are critical for long-term sectoral stability.
The association urged authorities to revisit the excise structure and engage with stakeholders to ensure that taxation reforms support both economic and social objectives without unintended consequences.
