What is the new excise duty on cigarettes in India as of February 1, 2026?

As of February 1, 2026, the excise duty on cigarettes in India will range from 2,050 to 8,500 rupees per 1,000 sticks.

How did ITC Ltd. and Godfrey Phillips India stocks react to the tax increase?

ITC Ltd. shares plunged 10%, the most since 2020, while Godfrey Phillips India Ltd. closed 17% lower following the announcement.

Why is the Indian government increasing tobacco taxes?

The government is increasing tobacco taxes to discourage consumption, reduce public health costs, and prevent sin goods from becoming more affordable.

Home / Business and Economy / India's Tax Hike Sparks Tobacco Stock Plunge

India's Tax Hike Sparks Tobacco Stock Plunge

1 Jan

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Summary

New excise duty on cigarettes set to increase over 30%.
ITC and Godfrey Phillips India shares dropped significantly.
Tax hike aims to curb tobacco use and public health costs.

India's Tax Hike Sparks Tobacco Stock Plunge

As of February 1, 2026, India will implement a substantial increase in excise duties on cigarettes, with charges ranging from 2,050 to 8,500 rupees per 1,000 sticks. This move, announced late Wednesday, represents a potential tax hike of over 30%, leading to significant market reactions.

Consequently, shares of ITC Ltd., India's largest cigarette manufacturer, experienced their steepest drop in nearly six years, falling 10%. Godfrey Phillips India Ltd. also saw its stock close 17% lower on Thursday in Mumbai. Trading volumes for both companies surged dramatically, indicating investor concern.

The government's objective is to curb tobacco consumption, which contributes to significant public health costs estimated at over 2.4 trillion rupees annually. Officials believe maintaining higher prices is a key tool to discourage use and do not anticipate the tax increase will significantly fuel smuggling or a grey market.