Tobacco stocks crash as India imposes new excise duty
What's the story
Shares of major tobacco companies, including ITC and Godfrey Phillips India, have witnessed a sharp decline on Thursday. The fall comes after the Indian government imposed a new excise duty on cigarettes. The new tax will be levied at ₹2,050-8,500 per thousand sticks depending on the length of the cigarettes. The move is expected to make cigarettes costlier for smokers in India, the world's most populous country.
Market impact
ITC and Godfrey Phillips India shares plummet
ITC, the market leader and manufacturer of Gold Flake, saw its shares fall by more than 10% to ₹369.2. This is the biggest single-day decline that ITC has seen since March 2020. Meanwhile, Godfrey Phillips India, which distributes Marlboro cigarettes in India, saw a decline of 19% to ₹2,230.30 apiece due to the new tax imposition. VST Industries shares also dropped over 7%.
Duty details
New excise duty to be effective from February 1
The Finance Ministry announced an excise duty of ₹2,050-8,500 per 1,000 sticks based on cigarette length. The new tax will be applicable from February 1. It is in addition to the existing 40% Goods and Services Tax (GST). The move follows the Parliament's approval of the Central Excise (Amendment) Bill, 2025 in December last year.
Price implications
New tax could lead to price hikes
The new excise duty is likely to increase overall costs by 22-28% for 75-85mm cigarettes, according to analysts at ICICI Securities. They also estimate that cigarettes longer than 75mm account for around 16% of ITC's volumes and could see price increases of ₹2-3 per stick due to this levy.