CBIC Exempts Excise Duty on Unbranded, Non-Retail Unmanufactured Tobacco and Refuse, Retains 18% Levy on Others [Read Notification]

The Central Board of Indirect Taxes and Customs (CBIC) has issued an amendment notification dated 1 February, 2026, now exempting unmanufactured tobacco and tobacco refuse that do not bear a brand name and are not packed for retail sale from excise duty, while retaining an 18% levy on all other such products.

The latest notification amends Notification No. 03/2025–Central Excise issued by the department on December 31, 2025.

Under the earlier notification from December 31, 2025, excise duty at the rate of 18% applied uniformly to goods falling within the ambit of tariff heading 2401, with unmanufactured tobacco and tobacco refuse falling under the item description of ‘All Goods’.

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However, this amendment bifurcates the ‘All Goods’ entry under Item 1 of the amended notification into two distinct categories, giving more clarity on a narrowly defined segment of products.

As per the amendment, a new substituted entry provides that unmanufactured tobacco or tobacco refuse which does not carry a brand name and is not packed for retail sale will attract nil excise duty.

Simultaneously, a new serial entry has been inserted to expressly provide that all other unmanufactured tobacco or tobacco refuse, not falling within the exempted category, will continue to attract excise duty at 18%.

The revised amendment has been carried out by the Central Board of Indirect Taxes and Customs under the powers conferred by Section 5A(1) of the Central Excise Act, 1944, and shall be in effect from February 1, 2026 onwards.

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The amendment to the duty structure comes on the same day as the Union Budget 2026-27 was presented in the Lok Sabha by Finance Minister Nirmala Sitharaman which introduced broader fiscal announcements.

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The Finance Bill, 2026 proposes an amendment to the Seventh Schedule to the Finance Act, 2001 to revise the National Calamity Contingent Duty (NCCD) schedule rates applicable to chewing tobacco, jarda scented tobacco and other tobacco products including gutkha, with effect from May 1, 2026.

The Bill proposes to increase the schedule rate from 25% to 60%, while the effective rate of duty will remain unchanged at 25%, which will be maintained through a corresponding notification.

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