Tobacco excise: Govt caps deemed output for Rs 2 tobacco pouches via machine-speed formula
For tobacco pouches priced up to Rs 2, the excise output will be deemed at 1.12–3.36 crore pouches per month, based on machine speed, with faster machines assessed through a multiplier formula tied to their declared capacity. For pouches priced above Rs 2, lower but significant deemed outputs apply — 1.01–3.03 crore pouches per month, rising further for high-speed machines under a separate, multiplier-based calculation.
- Jan 1, 2026,
- Updated Jan 1, 2026 1:20 PM IST
The Centre has tightened excise compliance for chewing tobacco and other notified tobacco products through a series of notifications issued under the Central Excise Act, reinforcing machine-based taxation, clarifying product definitions, and strengthening enforcement powers.
Published in the Gazette of India, the notifications continue the capacity-based excise duty regime, under which tax liability is determined not by declared production but by the number and speed of packing machines installed at manufacturing units.
A key element of the notification is the revised production capacity formula for packing machines, which directly links excise liability to machine speed and the retail sale price (RSP) of tobacco pouches. The government has specified the maximum deemed monthly production per machine based on how many pouches a machine can pack per minute.
For products priced up to Rs 2 per pouch, a machine operating at:
up to 500 pouches per minute is deemed to produce 1.12 crore pouches per month,
501–1,000 pouches per minute corresponds to 2.24 crore pouches,
1,001–1,500 pouches per minute implies 3.36 crore pouches,
while machines operating at 1,501 pouches per minute and above are assessed using a multiplier formula (22,464 × S, where S represents the declared speed).
For products priced above Rs 2 per pouch, the deemed output is lower but still substantial:
1.01 crore pouches per month for machines up to 500 pouches per minute,
2.02 crore pouches for 501–1,000 pouches per minute,
3.03 crore pouches for 1,001–1,500 pouches per minute,
and 20,218 × S for machines exceeding 1,500 pouches per minute.
Maximum Capacity of Production per Packing Machine per Month (for Notified Goods – Number of Pouches)
------------------------------------------------------------------------------------------------------- Sl. | Retail Sale Price | Up to 500 | 501–1000 | 1001–1500 | 1501 pouches/min No. | (per pouch) | pouches/min | pouches/min | pouches/min | and above ------------------------------------------------------------------------------------------------------- 1 | Up to Rs. 2.00 | 1,12,32,000 | 2,24,64,000 | 3,36,96,000 | 22,464 × S ------------------------------------------------------------------------------------------------------- 2 | Exceeding Rs. 2 | 1,01,08,800 | 2,02,17,600 | 3,03,26,400 | 20,218 × S
Source: Gazette of India
By codifying production assumptions in this manner, the government removes scope for under-reporting of output and links duty directly to installed capacity and declared retail price.
The notification also expands the definition of packing machines to include all configurations, i.e. vertical, horizontal, single-track, multi-track or otherwise, closing loopholes previously used to evade duty. In addition, chewing tobacco under the relevant tariff item now explicitly includes filter khaini, ensuring uniform tax treatment across similar products.
Manufacturers are required to declare, register, and operate only approved packing machines. Any discrepancy in machine declaration, speed reporting, or RSP marking can result in reassessment of duty, seizure of goods, and penal action.
The Centre has also strengthened enforcement powers, allowing excise authorities to inspect premises, verify machine speed, seal equipment, and confiscate non-compliant goods.
The Centre has tightened excise compliance for chewing tobacco and other notified tobacco products through a series of notifications issued under the Central Excise Act, reinforcing machine-based taxation, clarifying product definitions, and strengthening enforcement powers.
Published in the Gazette of India, the notifications continue the capacity-based excise duty regime, under which tax liability is determined not by declared production but by the number and speed of packing machines installed at manufacturing units.
A key element of the notification is the revised production capacity formula for packing machines, which directly links excise liability to machine speed and the retail sale price (RSP) of tobacco pouches. The government has specified the maximum deemed monthly production per machine based on how many pouches a machine can pack per minute.
For products priced up to Rs 2 per pouch, a machine operating at:
up to 500 pouches per minute is deemed to produce 1.12 crore pouches per month,
501–1,000 pouches per minute corresponds to 2.24 crore pouches,
1,001–1,500 pouches per minute implies 3.36 crore pouches,
while machines operating at 1,501 pouches per minute and above are assessed using a multiplier formula (22,464 × S, where S represents the declared speed).
For products priced above Rs 2 per pouch, the deemed output is lower but still substantial:
1.01 crore pouches per month for machines up to 500 pouches per minute,
2.02 crore pouches for 501–1,000 pouches per minute,
3.03 crore pouches for 1,001–1,500 pouches per minute,
and 20,218 × S for machines exceeding 1,500 pouches per minute.
Maximum Capacity of Production per Packing Machine per Month (for Notified Goods – Number of Pouches)
------------------------------------------------------------------------------------------------------- Sl. | Retail Sale Price | Up to 500 | 501–1000 | 1001–1500 | 1501 pouches/min No. | (per pouch) | pouches/min | pouches/min | pouches/min | and above ------------------------------------------------------------------------------------------------------- 1 | Up to Rs. 2.00 | 1,12,32,000 | 2,24,64,000 | 3,36,96,000 | 22,464 × S ------------------------------------------------------------------------------------------------------- 2 | Exceeding Rs. 2 | 1,01,08,800 | 2,02,17,600 | 3,03,26,400 | 20,218 × S
Source: Gazette of India
By codifying production assumptions in this manner, the government removes scope for under-reporting of output and links duty directly to installed capacity and declared retail price.
The notification also expands the definition of packing machines to include all configurations, i.e. vertical, horizontal, single-track, multi-track or otherwise, closing loopholes previously used to evade duty. In addition, chewing tobacco under the relevant tariff item now explicitly includes filter khaini, ensuring uniform tax treatment across similar products.
Manufacturers are required to declare, register, and operate only approved packing machines. Any discrepancy in machine declaration, speed reporting, or RSP marking can result in reassessment of duty, seizure of goods, and penal action.
The Centre has also strengthened enforcement powers, allowing excise authorities to inspect premises, verify machine speed, seal equipment, and confiscate non-compliant goods.