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India's Tax Hike Sparks Tobacco Stock Plunge
1 Jan
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.
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.
