A fresh notification withdrawing the levy on unmanufactured tobacco was issued on February 1, the day the Union Budget was presented by Finance Minister Nirmala Sitharaman.
| Photo Credit: M.A. Sriram
Tobacco traders, who had stayed off auction platforms in the State since January 24 to oppose the central excise duty of 18% levied on unmanufactured tobacco, have announced their return to auctions from February 5 in the wake of the Centre’s decision to withdraw the levy.
The Indian Tobacco Association, which comprises tobacco traders, appealed to its members, in a statement on February 3, to make necessary arrangements to participate in the auctions in the State from February 5 onwards.
The Ministry of Finance, Government of India, had issued a notification on December 31, 2025, imposing 18% central excise duty on unmanufactured tobacco. However, a fresh notification withdrawing the levy was issued on February 1, the day the Union Budget was presented by Finance Minister Nirmala Sitharaman.
The Union government’s decision to withdraw the levy was preceded by visits to Ms. Sitharaman in New Delhi by a delegation of tobacco farmers from Andhra Pradesh, Telangana and Karnataka. The delegation, which expressed serious concerns over the levy, was led by D. Purandeshwari, Rajahmundry MP, and Tobacco Board Chairman Yashwant Kumar Chidipothu.
Vikram Raj Urs, general secretary of Federation of Flue Cured Virginia (FCV) Tobacco Growers Associations of Karnataka, said the imposition of the central excise duty on unmanufactured tobacco would have an adverse impact on not just traders and exporters, but also growers.
Though traders would have to newly register themselves for payment of the central excise duty, they would have conveniently transferred the tax burden on tobacco growers, said sources in the tobacco industry.
The withdrawal of the duty on unmanufactured tobacco has also come as a relief to growers, who feared a dip in tobacco prices.
More than half of the tobacco cultivated in the State for the year 2025-26 is yet to be sold. Though the auction season concludes by March-end every year, it is likely to be extended by a week to a fortnight this year.
Out of the 100 million kg of authorised crop size in the State, the yield is expected to be around 85 million kg this year, said sources in the Tobacco Board.
When the auctions in Karnataka were suspended on January 24, about 41 million kg or roughly 45% of tobacco had been sold on the auction platforms at an average price of around ₹289-290 per kg, about ₹23 to ₹24 more than last year’s average of ₹267 per kg.
It may be mentioned here that the Centre has also increased the Goods and Services Tax (GST) on tobacco products from 28 to 40%, which is applicable for “sin” products.
However, sources in the tobacco industry in the State pointed out that 80% of the tobacco cultivated in Karnataka is exported to foreign cigarette manufacturers, and the impact of the hike in GST on tobacco cultivators is yet to be ascertained.
Published – February 03, 2026 07:00 pm IST
