The Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill, 2025, which replaces the existing GST compensation cess on tobacco products with increased central excise duties.

The bill, introduced on December 1, amends the Central Excise Act, 1944, to adjust tax rates while discontinuing the compensation cess once its liabilities are settled.

Advertisement

Since GST’s introduction in 2017, many central excise duties were repealed except for select items like tobacco, which remain subject to GST, compensation cess, and excise duty. The compensation cess was designed to offset revenue losses for states.

Finance Minister Nirmala Sitharaman explained, “The bill provides fiscal space to increase central excise duty on tobacco products so as to protect tax incidence,” ensuring the o

See Full Page