ITC shares plunge most in six years after India raises tobacco, cigarette tax| Enterprise Information

Shares of India’s largest cigarette maker ITC Ltd. fell essentially the most in six years after the federal government imposed larger tax on tobacco merchandise.

ITC is India’s largest cigarette maker, drawing 40% income from the product class. (Reuters)

From 1 February 2026, cigarettes might be charged an excise responsibility of ₹2,050-8,500 per 1,000 sticks, in accordance with a authorities notification launched late Wednesday. That is on prime of GST at 40% on tobacco-based merchandise and cigarettes—additionally kicking in from 1 February.

ITC’s share worth dropped as a lot as 9.8%, essentially the most since 2020, whereas Godfrey Phillips India Ltd. dropped 17.6% on the BSE. ITC sells cigarette manufacturers like Basic and Gold Flake, whereas Godfrey sells Marlboro and 4 Sq..

On 22 September 2025, the Narendra Modi authorities minimize GST charges on soaps to small vehicles within the largest oblique tax reforms since items and companies tax first got here into impact on 1 July 2017. The rationalisation lowered the variety of GST slabs to 2 (5% and 18%) from 4 (5%, 12%, 18% and 28%). A brand new GST slab of 40% was launched for so-called sin items—tobacco merchandise and luxurious gadgets corresponding to SUVs to Swiss watches and purses.

The GST compensation cess was scrapped as a part of the overhaul, which might have lowered the efficient tax fee on tobacco merchandise, however now an excellent larger excise responsibility has changed it. The taxation is predicted to make up the shortfall in GST income from different product classes.

At 25.3 crore individuals, India has the second-highest inhabitants of tobacco customers.

To make certain, the cigarette tax is larger than beforehand anticipated by analysts and buyers. It implies a tax hike of greater than 30% if the Nationwide Calamity Contingent Responsibility continues, Jefferies Monetary Group Inc. mentioned.

“Whereas we’re nonetheless not sure on the ultimate final result, if confirmed, this might be a transparent destructive as volumes might be impacted and considerations would additionally re-emerge on danger of shedding some volumes to illicit trade,” Jefferies analysts led by Vivek Maheshwari wrote in a 1 January word.

ITC would possibly must hike costs by “at the least 15%” to cross on the general influence to shoppers, if not larger, Jefferies mentioned. ITC will get greater than 40% of its income from cigarettes.

British American Tobacco Plc, ITC’s largest shareholder, has been promoting down its stake within the Indian cigarette maker. In Might, it offered about $1.5 billion value of inventory to pare its holding to 22.91%.