The Central Excise (Amendment) Bill, 2025, received Parliament’s approval on Thursday after being passed by the Rajya Sabha. The legislation, which the Lok Sabha had cleared on Wednesday, replaces the existing GST compensation cess on tobacco products with increased central excise duties.

Introduced on December 1, the bill amends the Central Excise Act, 1944. Its primary goal is to adjust the tax structure on tobacco, discontinuing the compensation cess once all liabilities are settled and providing fiscal space for a duty hike. This move maintains the “sin tax” incidence on tobacco while modernizing India’s indirect tax framework.

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Since the rollout of GST in 2017, tobacco has remained subject to a unique three-part tax structure: GST, a compensation cess (designed to offs

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