The FED has alternated between two‑tier and three‑tier systems over the past decade. The 2017 move to a three‑tier structure, which lowered rates for low‑price brands, triggered a sharp fall in retail prices and a surge in domestic production – yet failed to deliver additional revenue. In response, the 2019–20 budget restored a two‑tier system and raised rates across tiers. Evidence shows that higher prices are likely to curb cigarette consumption by 9–18 percent, improving health outcomes, while also strengthening revenue collection. This analysis explores how the revised FED structure balances consumption reduction with fiscal gains.
