Under the original legislation, shopkeepers found to be in breach of the new measures - a ban on all point-of-sale advertising, plus provision of an out-of-sight, closed container for tobacco products - would have faced an automatic 90-day licence suspension from a new retail register.
But the threat of automatic suspension has now been removed, with penalties left to the discretion of the judge hearing the case.
"We're relieved and delighted by the change - it's something we lobbied hard to win," said Vincent Jennings, chief executive of the Convenience Stores' & Newsagents' Association (CSNA). "It was an unfair and disproportionate penalty for what could be a relatively trivial or technical offence."
He added: "For many shops, sales of cigarettes and tobacco are a major part of their business. To take away that for 90 days could and probably would mean closure and the loss of livelihoods."
But the Irish Cancer Society accused the government of "giving in to the exaggerated claims of some retailers, backed up by the tobacco industry".
It said the lack of a minimum penalty could undermine the legislation and cited a recent Office of Tobacco Control survey that found 40% of retailers were prepared to sell cigarettes to minors.