The Union Finance Ministry has notified a machine-based excise duty regime for chewing tobacco, flavoured tobacco (zarda) and gutkha, tightening tax compliance in the sector from February 1, 2026. The new framework, issued through a series of Central Excise notifications dated December 31, 2025, introduces capacity-based levy linked to the maximum rated output of packing machines rather than actual production.
Under the Chewing Tobacco, Zarda and Gutkha Packing Machines (Capacity Determination and Duty Collection) Rules, 2025, duty will be calculated on the deemed annual production capacity of each packing machine. Manufacturers producing pouches will fall under the new regime, while those making products in other forms, such as tins, will continue to be taxed on transaction value.
Existing excise-registered manufacturers will not require fresh registration but must file a mandatory declaration (Form CE DEC-01) by February 7, 2026, detailing machine specifications, rated capacity and retail sale prices. A chartered engineer’s certificate will be required to verify technical parameters.
The rules also clarify abatement provisions for non-operational days and empower excise authorities to physically verify factories before finalising annual capacity. The move is aimed at curbing tax evasion, improving revenue certainty and strengthening oversight in a high-risk segment of the tobacco industry.
