Odisha Imposes Statewide Tobacco Ban; Centre Overhauls Taxation

The fight against tobacco in India has entered a decisive new phase. Effective January 23, 2026, the Government of Odisha has imposed a total ban on smokeless tobacco, while the Central Government is set to launch a rigorous new taxation and surveillance regime starting February 1, 2026.

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1. Odisha’s Comprehensive Ban

The Odisha State Health Department has officially prohibited the manufacture, storage, distribution, and sale of all food products containing tobacco or nicotine.

• Scope of the Ban: Covers Gutkha, Pan Masala, Khaini, Zarda, and all flavored/scented chewable products.

• Loophole Closure: The ban explicitly includes “twin-pack” products—where tobacco and pan masala are sold separately but intended to be mixed—a common tactic previously used to bypass restrictions.

• Exclusions: This specific health notification focuses on smokeless tobacco; cigarettes and bidis remain excluded from this particular ban but are subject to strict central regulations.

• Public Health Context: Officials cited that 42% of Odisha’s adult population uses smokeless tobacco, nearly double the national average, leading to high rates of oral and esophageal cancer.

2. Central Government’s New Tax Regime (Effective Feb 1)

The Ministry of Finance is replacing the old GST Compensation Cess with a multi-layered tax structure designed to ensure tobacco remains expensive.

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3. Capacity-Based Taxation & Surveillance

To curb rampant tax evasion in the unorganized sector, the government is shifting from “actual production” to “capacity-based” taxation for pouch-packed products.

• Machine-Based Levy: Tax is now calculated based on the maximum rated speed of packing machines (pouches per minute). For example, a machine producing 500 pouches/min can attract a monthly cess of over ₹1 Crore.

• Mandatory CCTV: Manufacturers must install functional CCTV systems covering all packing areas.

• Data Retention: Footage must be preserved for 24 months (with some rules suggesting up to 48 months for certain technical audits) and made available to excise officers upon request.

• Strict Declarations: All manufacturers must declare machine technical specs (gearbox ratios, motor RPM) certified by a Chartered Engineer by February 7, 2026.

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