Why did ITC and Godfrey Phillips stocks fall?

ITC and Godfrey Phillips stocks fell due to the finance ministry's imposition of an additional excise duty on tobacco products.

When is the new excise duty on tobacco effective?

The new excise duty on tobacco products is effective from February 1.

What replaces the compensation cess on tobacco?

An additional excise duty on tobacco products replaces the existing compensation cess.

Home / Business and Economy / Tobacco Tax Hike Sparks Stock Plunge!

Tobacco Tax Hike Sparks Stock Plunge!

1 Jan

•

Summary

Tobacco stocks like ITC and Godfrey Phillips dropped significantly.
Finance ministry imposed additional excise duty on tobacco products.
New levies replace compensation cess, effective February 1.

Tobacco stocks, notably ITC and Godfrey Phillips, experienced a significant downturn on Thursday, with shares dropping up to 8%. This market reaction followed the finance ministry's notification of an additional excise duty on tobacco products, set to take effect on February 1. The new levies are intended to supplement the Goods and Services Tax (GST) rates.

The updated excise duty structure, announced late Wednesday, will impose charges ranging from Rs 2,050 to Rs 8,500 per 1,000 cigarette sticks, varying by length. These additional taxes will be applied on top of the existing GST and will supersede the current compensation cess, which will be phased out from February 1. This change could compel cigarette manufacturers to increase product prices.

This development is underpinned by the Central Excise (Amendment) Bill, 2025, approved in December, which formalizes the excise duty on cigarettes and tobacco products. The increased taxation aims to align with global benchmarks, as current total taxes on cigarettes in India, at around 53% of retail prices, fall below the World Health Organization's recommended 75% for discouraging consumption.