It is also considering limiting the number of shops that can sell cigarettes, perhaps just two shops per suburb, and restricting the hours between which cigarettes can be sold.

The government has called for feedback on a suite of ideas aimed at reducing access to cigarettes and encouraging people to give up smoking, with comments invited till May 12 at the Time to Talk website.

And newsagents are already saying they will be unfairly hit.

Tobacco sales make up anything from 15 per cent to as much as 30 or 40 per cent of newsagents' business, Newsagents Association of NSW and the ACT chief executive Chiang Lim said.

While an extra $200 might not break the bank, if fees rose as high as $1700 by 2016, they might give it up as too hard, he said.

"If you're really fair dinkum about tackling tobacco there are other ways of doing it rather than picking on newsagents and other small business retailers, when ironically the ones that win are the supermarkets," he said.

The tobacco licence fee is $200 a year, unchanged since 2003. At the moment, 361 outlets are licensed to sell cigarettes, with no restriction on the number of licences. The ACT Government believes higher fees would see shops giving up selling tobacco, and has suggested increasing fees by $200 or $500 a year to an upper limit – putting the fee for 2014 at $400 or $700.

After South Australia increased its fees from $12.90 to $200 in 2007 ($253 now), the number of licences dropped by nearly a quarter over two years.

The discussion paper suggests a cap on the total number of licences, or a cap on the number in each suburb as low as two sellers for each suburb.

It also proposes a new “fit and proper person” test for people selling tobacco, as another way of restricting licences.

And it suggests time restrictions and age restrictions on who can sell cigarettes.

Sales could be restricted to business hours or school hours, or between 9.30am and 11.30am, and 6pm and 9pm. Rules could be changed so that only people aged over 18 are allowed to sell tobacco, or tobacco could be restricted to age-restricted premises, such as bars.

To stop people buying cigarettes in bulk, there could be limits on the amount bought at a time.

Health Protection Service director for ACT Health John Woollard has acknowledged business concern and urged feedback so the right decision would be made.

“There is going to be a spectrum of views around this issue and I expect there will be quite polarised debate on it, but that’s fine, that’s what a consultation process is about – it’s about soliciting people’s views and hearing their views,” he said.

Tobacco is the number one preventable cause of death in the country, with 15,000 people dying every year.

“While our smoking rates in the ACT have roughly halved since 1998 we are still sitting at somewhere between 11 and 12 per cent … and 15,000 people are still dying each year from this addictive and nasty chemical,” he said.

Mr Lim feared if tobacco sales were aligned with liquor sales, supermarkets could take over the trade.

"This is just intrinsically unfair," he said. "The ones that tend to be most impacted and less capable of absorbing the costs are the small businesses; the ones most capable of absorbing costs are supermarkets."

He said if the ACT Government was serious about reducing tobacco consumption, it should look to limiting imports and tackling illegal tobacco sales.

ACT Liberal Leader Jeremy Hanson said any increase in fees or red tape must be proven to reduce tobacco consumption and not just another tax on small business.

NSW, Queensland and Victoria don’t have tobacco licences for retailers. Licence fees in the other states and territories are broadly similar to Canberra, ranging up to $300 in Tasmania.