04 December 2025 Punjab Khabarnama Bureau : Union Finance Minister Nirmala Sitharaman clarified in the Lok Sabha that the recent hike in duties on cigarettes will not be retained exclusively by the Centre. Instead, the increased revenue from these duties will be shared with State governments, following the established tax-sharing formula under the Finance Commission.
Why This Clarification Was Needed
Opposition members had raised concerns that the Centre was imposing higher duties on tobacco products without clearly stating how the revenue would be distributed. They argued that States depend heavily on shared revenues and must be kept informed about fiscal impacts.
In response, Sitharaman said that duties enhanced on cigarettes fall under categories eligible for divisible pool sharing, and therefore States will automatically receive their rightful portion.
Revenue Implications
Cigarettes are among the highest-taxed products in the country due to health concerns and revenue efficiency. The recent duty hike aims to:
- Reduce tobacco consumption
- Boost government revenue without directly burdening essential goods
- Strengthen public health initiatives
With duties rising, States are expected to gain additional revenue flows, easing fiscal pressures and supporting welfare schemes.
Health and Fiscal Balance
Sitharaman reiterated that the government’s tobacco-related tax strategy serves dual purposes:
- Discouraging unhealthy consumption, especially among youth
- Generating stable revenue for both Centre and States
Public health advocates have welcomed the move, saying higher taxes on cigarettes are proven to reduce addiction rates.
Opposition’s View
Some MPs argued that while revenue sharing is positive, the Centre must also increase funding for health programs aimed at tobacco-related diseases. They urged coordinated efforts between Union and State governments for better policy implementation.
Sitharaman assured the House that the Centre is committed to transparency and cooperation with States on fiscal matters.
Summary
Finance Minister Nirmala Sitharaman told Lok Sabha that increased duties on cigarettes will be shared with States, easing concerns about revenue distribution and reinforcing the government’s dual approach of raising funds and curbing tobacco use.