Budget 2026-27 Cost Hikes: Cigarettes Up Rs 55, STT Doubles on F&O Trading | India Finance
India's Union Budget 2026-27, presented on February 1, 2026, introduced targeted tax hikes and duty changes that made several goods and services costlier, prioritizing domestic manufacturing and curbing speculation. While essentials like medicines and mobiles got cheaper, luxury imports, sin goods, and trading faced increases.
Sin Goods Surge
Cigarettes, tobacco, pan masala, and bidis now attract higher excise duties and a new Health and National Security Cess on top of 40% GST (18% for bidis), replacing prior compensation cess—potentially raising cigarette pack prices by up to Rs 55.
Alcohol faces rationalized duties and TCS adjustments at 2%, pushing premium imported brands higher, with state-level VAT hikes expected to amplify retail costs.
Trading Costs Rise
Securities Transaction Tax (STT) doubled on futures to 0.05% (from 0.02%) and rose to 0.15% on options premiums/exercises (from 0.1%/0.125%), adding significant costs for F&O traders—for a Rs 20 lakh futures contract, STT jumps from Rs 400 to Rs 1,000; high-volume traders face annual bills up 50-100%.
This aims to reduce retail speculation in derivatives, which hit record volumes in FY26, but squeezes day traders and algo funds.
Luxury Imports Dearer
Imported luxury watches see duty hikes via rationalization from 20-30% slabs, inflating premium brands like Rolex or Omega by 10-15% at retail.
Umbrellas' parts now face BCD at "10% or Rs 25/kg whichever higher," while video game parts and consoles lose exemptions from April 1, raising gaming rig costs.
Equipment and Inputs
Coffee roasting/brewing machines lose BCD exemptions, raising cafe startup costs by 8-12% on imports from China/Europe.
Specific fertilizers like ammonium phosphate lose import fee exemptions, adding pressure on farmers amid monsoon uncertainties; cameras/filming gear duties up 5-10% hit content creators.
Middle-Class Squeeze
Real estate registration fees rationalized upward in metro circles (up to 7% combined stamp duty), cooling luxury home buys; aerated drinks face higher cess, nudging soda prices up 5-8%.
Key Cost Impacts
Category | Change Reason | Example Impact |
|---|---|---|
Tobacco/Cigarettes | Excise + Cess over GST | Packs up Rs 55 |
F&O Trading | STT to 0.05%/0.15% | +Rs 600 per Rs 20L contract |
Luxury Watches | Duty rationalization | +10-15% on premiums |
Coffee Machines | BCD exemption removed | Cafe gear up 8-12% |
Fertilizers | Import fee exemption gone | Higher input costs for farmers |
Alcohol (Premium) | TCS 2% + duty tweaks | Imported bottles up 10% |
Gaming Consoles | Exemption withdrawn | New PS6/Xbox up Rs 5K |
These shifts aim to boost local production and revenue but squeeze discretionary spending for middle-class consumers and traders, with Rs 45,000 crore extra from sin taxes and STT alone projected for FY27.
