The Central Government issued Notification No. 03/2025-Compensation Cess (Rate) dated December 31, 2025 has notified the reduction of Goods and Services Tax (Compensation to States) Cess to “Nil” on specified pan masala and tobacco products, with effect from the date specified in the notification.
The decision has been taken in exercise of the powers conferred under sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), on the recommendations of the GST Council.
Accordingly, vide Notification No. 1/2017–Compensation Cess (Rate), dated 28th June, 2017, as amended from time to time, the Central Government has specified “Nil” rate of compensation cess against various goods falling under Chapters 21 and 24 of the Customs Tariff, including:
- Pan Masala (with or without declared retail sale price),
- Unmanufactured tobacco (with or without lime tube),
- Cigarettes, cigars, cigarillos, and tobacco substitutes,
- Chewing tobacco, gutkha, khaini, snuff, jarda, and other tobacco preparations,
- Smoking mixtures, hookah tobacco, tobacco extracts and essences, and
- Other specified tobacco products bearing or not bearing a brand name.
Earlier, these goods attracted compensation cess either at specific rates linked to retail sale price (RSP) or ad valorem rates, in addition to GST. With the issuance of the present notification, the compensation cess on all such notified items stands reduced to Nil.
The detailed list of goods, tariff headings, and corresponding changes in cess rates is contained in the Schedule appended to the notification.
This measure is aimed at giving effect to the revised policy decision of the Government in respect of levy of compensation cess under GST.
This notification shall come into force on the 1st day of February, 2026.
Schedule
| S. No. | Chapter / Heading / Sub-heading / Tariff item | Description of Goods | Rate of goods and services tax compensation cess | |
| (1) | (2) | (3) | (4) (Old Rates) | (5) (New Rates) |
| 1. | 2106 90 20 | Pan Masala with declared retail sale price | 0.32R per unit | “Nil” |
| 1A. | 2106 90 20 | Pan Masala, other than goods covered under S. No. 1 above | 60% | “Nil” |
| 5. | 2401 | Unmanufactured tobacco (without lime tube) – bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 5A. | 2401 | Unmanufactured tobacco (without lime tube)– bearing a brand name, other than goods covered under S. No. 5 above | 71% | “Nil” |
| 6. | 2401 | Unmanufactured tobacco (with lime tube) – bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 6A. | 2401 | Unmanufactured tobacco (with lime tube)– bearing a brand name, other than goods covered under S. No. 6 above | 65% | “Nil” |
| 7. | 2401 30 00 | Tobacco refuse, bearing a brand name with declared retail sale price | 0.32R per unit | “Nil” |
| 7A. | 2401 30 00 | Tobacco refuse, bearing a brand name, other than goods covered under S. No. 7 above | 61% | “Nil” |
| 8. | 2402 10 10 | Cigar and cheroots | 21% or ₹ 4170 per thousand, whichever is higher | “Nil” |
| 9. | 2402 10 20 | Cigarillos | 21% or ₹ 4170 per thousand, whichever is higher | “Nil” |
| 10. | 2402 20 10 | Cigarettes containing tobacco other than filter cigarettes, of length not exceeding 65 millimetres | 5% + ₹ 2076 per thousand | “Nil” |
| 11. | 2402 20 20 | Cigarettes containing tobacco other than filter cigarettes, of length exceeding 65 millimetres but not exceeding 75 millimetres | 5%+ ₹ 3668 per thousand | “Nil” |
| 12. | 2402 20 30 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres | 5% + ₹ 2076 per thousand | “Nil” |
| 13. | 2402 20 40 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres but not exceeding 70 millimetres | 5% + ₹ 2747 per thousand | “Nil” |
| 14. | 2402 20 50 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 70 millimetres but not exceeding 75 millimetres | 5% + ₹ 3668 per thousand | “Nil” |
| 15. | 2402 20 90 | Other cigarettes containing tobacco | 36% + ₹ 4170 per thousand | “Nil” |
| 16. | 2402 90 10 | Cigarettes of tobacco substitutes | ₹ 4006 per thousand | “Nil” |
| 17. | 2402 90 20 | Cigarillos of tobacco substitutes | 12.5% or ₹ 4,006 per thousand whichever is higher | “Nil” |
| 18. | 2402 90 90 | Other | 12.5% or ₹ 4,006 per thousand whichever is higher | “Nil” |
| 19. | 2403 11 10 | ‘Hookah’ or ‘gudaku’ tobacco bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 19A. | 2403 11 10 | ‘Hookah’ or ‘gudaku’ tobacco, bearing a brand name, other than goods covered under S. No. 19 above | 72% | “Nil” |
| 20. | 2403 11 10 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’ not bearing a brand name with declared retail sale price | 0.12R per unit | “Nil” |
| 20A. | 2403 11 10 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’, not bearing a brand name, other than goods covered under S. No. 20 above | 17% | “Nil” |
| 21. | 2403 11 90 | Other water pipe smoking tobacco not bearing a brand name with declared retail sale price | 0.08R per unit | “Nil” |
| 21A. | 2403 11 90 | Other water pipe smoking tobacco, not bearing a brand name, other than goods covered under S. No. 21 above | 11% | “Nil” |
| 22. | 2403 19 10 | Smoking mixtures for pipes and cigarettes, with declared retail sale price | 0.69R per unit | “Nil” |
| 22A. | 2403 19 10 | Smoking mixtures for pipes and cigarettes, other than goods covered under S. No. 22 above | 290% | “Nil” |
| 23. | 2403 19 90 | Other smoking tobacco bearing a brand name with declared retail sale price | 0.28R per unit | “Nil” |
| 23A. | 2403 19 90 | Other smoking tobacco bearing a brand name, other than goods covered under S. No. 23 above | 49% | “Nil” |
| 24. | 2403 19 90 | Other smoking tobacco not bearing a brand name with declared retail sale price | 0.08R per unit | “Nil” |
| 24A. | 2403 19 90 | Other smoking tobacco, not bearing a brand name, other than goods covered under S. No. 24 above | 11% | “Nil” |
| 24B. | 2403 91 00 | “Homogenised” or “reconstituted” tobacco, bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 24C. | 2403 91 00 | “Homogenised” or “reconstituted” tobacco, bearing a brand name, other goods covered under S. No. 24 B above | 72% | “Nil” |
| 25. | 2404 11 00 | “Homogenised” or “reconstituted” tobacco, bearing a brand name | 72% | “Nil” |
| 26. | 2403 99 10 | Chewing tobacco (without lime tube), with declared retail sale price | 0.56R per unit | “Nil” |
| 26A. | 2403 99 10 | Chewing tobacco (without lime tube), other than goods covered under S. No. 26 above | 160% | “Nil” |
| 27. | 2403 99 10 | Chewing tobacco (with lime tube), with declared retail sale price | 0.56R per unit | “Nil” |
| 27A. | 2403 99 10 | Chewing tobacco (with lime tube), other than goods covered under S. No. 27 above | 142% | “Nil” |
| 28. | 2403 99 10 | Filter khaini, with declared retail sale price | 0.56R per unit | “Nil” |
| 28A. | 2403 99 10 | Filter khaini, other than goods covered under S. No. 28 above | 160% | “Nil” |
| 29. | 2403 99 20 | Preparations containing chewing tobacco, with declared retail sale price | 0.36R per unit | “Nil” |
| 29A. | 2403 99 20 | Preparations containing chewing tobacco, other than goods covered under S. No. 29 above | 72% | “Nil” |
| 30. | 2403 99 30 | Jarda scented tobacco, with declared retail sale price | 0.56R per unit | “Nil” |
| 30A. | 2403 99 30 | Jarda scented tobacco, other than goods covered under S. No. 30 above | 160% | “Nil” |
| 31. | 2403 99 40 | Snuff, with declared retail sale price | 0.36R per unit | “Nil” |
| 31A. | 2403 99 40 | Snuff, other than goods covered under S. No. 31 above | 72% | “Nil” |
| 32. | 2403 99 50 | Preparations containing snuff, with declared retail sale price | 0.36R per unit | “Nil” |
| 32A. | 2403 99 50 | Preparations containing snuff, other than goods covered under S. No. 32 above | 72% | “Nil” |
| 33. | 2403 99 60 | Tobacco extracts and essence bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 33A. | 2403 99 60 | Tobacco extracts and essence, bearing a brand name, other than good covered under S. No. 33 above | 2% | “Nil” |
| 34. | 2403 99 60 | Tobacco extracts and essence not bearing a brand name with declared retail sale price | 0.36R per unit | “Nil” |
| 34A. | 2403 99 60 | Tobacco extracts and essence, not bearing a brand name, other than goods covered under S. No. 34 above | 65% | “Nil” |
| 35. | 2403 99 70 | Cut tobacco, with declared retail sale price | 0.14R per unit | “Nil” |
| 35A. | 2403 99 70 | Cut tobacco, other than goods covered under S. No. 35 above | 20% | “Nil” |
| 36. | 2403 99 90 | Pan masala containing tobacco ‘Gutkha’, with declared retail sale price | 0.61R per unit | “Nil” |
| 36A. | 2403 99 90 | Pan masala containing tobacco ‘Gutkha’, other than goods covered under S. No. 36 above | 204% | “Nil” |
| 36B. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name, with declared retail sale price | 0.43R per unit | “Nil” |
| 36C. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name, other than good covered under S. No. 36B above | 96% | “Nil” |
| 36D. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name, with declared retail sale price | 0.43R per unit | “Nil” |
| 36E. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name, other than goods covered under S. No. 36D above | 89% | “Nil” |
| 37. | “2404 11 00, 2404 19 00 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 96% | “Nil” |
| 38. | 2404 11 00, 2404 19 00 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name | 89% | “Nil” |
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/12/CBIC-N.No_.-03_2025-Compensation-Cess-Rate.pdf
