FOR IMMEDIATE RELEASE
Cigarette Tax Shock Risks Handing the Market to Smugglers , says Consumer Group
New Delhi, 4 February 2026 – The Consumer Choice Center (CCC) warns that the government’s sudden hike in cigarette excise duties, already pushing prices up by ₹22 to ₹55 per pack, risks repeating the same costly mistake, driving consumers away from legal markets and straight into the clutches of illicit black market traders.
Following the tax overhaul on February 1, cigarettes are now subject to additional per-stick excise duties on top of the 40% GST rate. The result has been immediate. Retail prices have shot up overnight, with premium cigarette packs seeing the steepest hikes. While the move is being framed as a public health win, CCC cautions that a sharp, disruptive tax hike on legal tobacco products is unlikely to reduce consumption in practice. Instead, they reshape where consumers buy and who profits, leading to unintended consequences.
Shrey Madaan, Indian Policy Associate at the Consumer Choice Center, said:
“When legal cigarette prices jump overnight, demand doesn’t disappear; it shifts. India has seen this pattern repeatedly: higher taxes make illicit cigarettes and counterfeits more attractive, while small shopkeepers are left to deal with shrinking margins and rising risk”.
Distributors and retailers have already flagged that higher prices will boost smuggling and the circulation of counterfeit cigarettes. India’s tobacco retail ecosystem still relies heavily on small kirana stores and traditional stockists, many of whom operate on thin margins and depend on regulated supply chains to survive.
CCC warns that these are the first casualties of sudden tax shocks.
“Small shopkeepers sell legal products, pay taxes, and follow the rules,” Madaan added. “Illicit sellers do none of that. Every time prices are pushed too far, policy quietly rewards those who operate outside the system.”
Evidence from previous tax hikes shows the same pattern repeating itself: legal sales fall, illicit volumes rise, and enforcement agencies are left chasing an underground market with no quality controls, no age checks, and no accountability. CCC stresses that tobacco policy should be judged by outcomes, not intent. Stable, predictable taxation combined with strong enforcement reduces harm more effectively than sudden price shocks that fracture legal supply chains.
“This is not just about smokers paying more,” Madaan concluded. “It’s about whether policy strengthens compliance, or hands the market to smugglers and forgers. When taxes rise faster than enforcement, the black market always wins.”
