Naidu welcomes zero excise duty on unbranded raw tobacco

Chief Minister N Chandrababu Naidu on Wednesday welcomed the Central government’s decision to reduce excise duty to zero on unbranded and unpackaged raw tobacco, calling it a major relief for farmers, traders and exporters in Andhra Pradesh.

The state government has taken note of the gazette notification issued by the Union Ministry of Finance clarifying the duty structure for unmanufactured tobacco under HS Code 2401. The notification states that retail sales of unbranded and unpackaged tobacco will attract zero excise duty with effect from February 1, 2026.

The Finance Ministry said the revised framework was introduced to ensure uniformity, clarity, and transparency in tobacco taxation, following years of ambiguity over bulk and retail tobacco transactions. Naidu said the absence of clear guidelines earlier had led to disputes, compliance issues, and financial losses for farmers and traders. “Due to unclear provisions, stakeholders were facing unnecessary difficulties. The Centre’s decision addresses these long-standing concerns,” he said.

He said the move would help farmers secure better prices for their produce and improve market stability. The Chief Minister added that traders and exporters would also benefit from increased clarity and reduced regulatory burden.

The state government said the notification would reduce tax evasion by closing loopholes and preventing misuse of classification norms. It also welcomed the Centre’s efforts to curb fraudulent practices aimed at securing unfair tax benefits.

The Andhra Pradesh government appealed to the Union Government and the Central Board of Indirect Taxes and Customs (CBIC) to ensure uniform implementation of the notification across the country. Under the revised rules, unbranded tobacco sold in bulk without retail packaging, including produce supplied by farmers in sacks, will be exempt from excise duty.

However, tobacco products packed in small retail units or carrying company branding will continue to attract an 18 per cent excise duty. The State Finance Department said earlier regulations had failed to clearly define taxation based on packaging and branding, leading to frequent disputes during audits and billing.

The latest notification has resolved these uncertainties. Officials said the new policy would not adversely affect government revenue, as branded and retail-packaged tobacco would remain within the tax net. The government noted that farmers had earlier faced questioning and compliance pressure due to vague rules. With the new guidelines, such issues are expected to end, providing greater certainty to growers.