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The government will levy excise duty on chewing tobacco, jarda scented tobacco and gutkha based on packing machine capacity from February 1, with strict compliance and CCTV rules.
The government has notified a machine-based levy for chewing tobacco, jarda scented tobacco and gutkha.
The government has notified a machine-based levy for chewing tobacco, jarda scented tobacco and gutkha. The government will levy excise duty on chewing tobacco, jarda scented tobacco and gutkha based on packing machine capacity from February 1, with strict compliance and CCTV rules. Here are frequently asked questions explaining the scope, applicability and compliance requirements under the new framework.
1. What are the effective central excise duty rates on tobacco and tobacco products?
The effective duty rates have been notified through Notification No. 03/2025-Central Excise and Notification No. 04/2025-Central Excise, both dated December 31, 2025. These rates will come into force from February 1, 2026.
2. Where are the Packing Machines Rules provided?
The Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2025 have been notified through Notification No. 05/2025-Central Excise (N.T.) dated December 31, 2025, and will also be effective from February 1, 2026.
3. Which goods are covered under these Rules?
The Rules apply to goods notified under Section 3A of the Central Excise Act, 1944, namely:
- Chewing tobacco (including filter khaini)
- Jarda scented tobacco
- Gutkha
4. What is the objective of these Rules?
The Rules lay down the mechanism for determining production capacity and collecting central excise duty on the notified tobacco products based on packing machines.
5. Is separate registration required for existing central excise assessees?
No. Manufacturers who already hold a valid central excise registration are not required to take a separate registration under these Rules.
6. Do all manufacturers have to pay deemed duty under this scheme?
No. The Rules apply only to manufacturers producing pouched forms of the notified goods. Manufacturers producing the goods in other forms, such as tins, will continue to pay duty based on assessable value.
7. Is abatement on retail sale price available?
Yes. Abatement has already been factored into the applicable duty rates notified under Notification No. 01/2022-Central Excise (N.T.) dated February 1, 2022.
8. By when must existing manufacturers file their declaration?
Existing manufacturers must file Form CE DEC-01 on the portal within seven days of the Rules coming into force, that is, by February 7, 2026.
9. Is filing Form CE DEC-01 mandatory?
Yes. Filing the declaration is mandatory.
10. What details are required in the declaration?
Manufacturers must declare number of packing machines, technical specifications such as maximum rated capacity and gearbox ratios, and retail sale prices of the pouches.
11. Why is a Chartered Engineer’s certificate required?
The certificate provides technical verification of the number of tracks or funnels, gearbox ratios, and revolutions per minute (RPM) of the main motor.
12. Is actual production relevant for duty calculation?
No. Duty is based on deemed production, calculated using the maximum rated capacity of the packing machines.
13. How is duty calculated?
Under Section 3A of the Central Excise Act, duty is payable based on the determined annual production capacity.
Pending verification of declarations, duty is payable based on retail sale price (RSP) of the pouches, and Maximum rated speed (pouches per minute) of the machine
Illustration: If a machine produces 500 pouches per minute with an RSP of Rs 2, duty per machine per month will be Rs 0.83 crore
If RSP is Rs 4, duty will be Rs 1.52 crore, being the higher of the prescribed values
14. Can a fresh declaration be filed before final capacity determination?
No. A fresh declaration cannot be filed until the jurisdictional Deputy or Assistant Commissioner issues an order on the earlier declaration.
15. How will annual capacity be determined?
The jurisdictional officer will conduct a physical inspection and verify machine specifications. Annual capacity will be calculated by multiplying the deemed monthly production by 12.
16. What if the department determines a higher capacity than declared?
The officer will issue an order after giving the manufacturer an opportunity of being heard. Any differential duty along with interest must be paid from the relevant date. For existing manufacturers, this applies from February 1, 2026.
17. What if the manufacturer files an appeal?
Even if an appeal is filed, duty must be paid as per the determination until the matter is resolved.
18. Will capacity determination happen every month?
No. Re-determination will occur only if there is a change in production factors, such as the number of machines or their rated capacity.
19. Is duty payable for a full month if production starts mid-month?
Yes. Duty is payable for the entire month in which machines are installed, even if operations begin mid-month.
20. How is the number of machines counted?
The number of machines for a month is taken as the maximum number installed on any day during that month.
21. What monthly filings are required?
Manufacturers must file Form CE STR-1 on or before the 10th day of the same month, in addition to the regular monthly return.
22. How is abatement calculated?
Abatement is calculated on a pro-rata basis using the formula:
Abatement = (Monthly duty × Days of non-operation) ÷ Total days in the month
23. Can abatement be claimed across months?
Yes. Abatement can be claimed for continuous non-operation of 15 days or more, even if the period spans two calendar months.
24. What conditions apply for claiming abatement?
The manufacturer must inform the department at least three working days in advance, and ensure the machine is sealed by the department.
25. Are machines deemed operational even if unused?
Yes. Installed machines are deemed operational unless officially sealed.
26. What is the sealing procedure?
Prior intimation of at least three working days is required before non-operation. Sealing will be carried out by the department.
27. How are sealed machines de-sealed?
The department must be informed at least three working days before resuming operations. De-sealing will be done in the presence of a jurisdictional officer.
28. What is the procedure for removal of machines?
Prior intimation of at least three working days is required before uninstallation for sale or disposal.
29. Is installation of CCTV mandatory?
Yes. Manufacturers must install CCTV coverage over all packing machine areas and preserve footage for at least 24 months.
30. Is rebate available under this scheme?
No. Rebate of central excise duty is not available.
31. What happens to duty paid in advance if a factory shuts down?
The manufacturer must surrender registration. Duty adjustment or refund will be processed as per prescribed rules.
32. Are exports without payment of duty allowed?
No. Exports without payment of duty are not permitted under the capacity-based levy scheme.
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January 01, 2026, 11:54 IST
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