New Delhi, Jan 2 (.) Shares of ITC Ltd fell sharply by 10 per cent, while Godfrey Phillips India went down by about 9 per cent, after the government announced a steep increase in excise duty on tobacco and tobacco products. The sharp fall in both stocks reflected the immediate market reaction to the higher tax burden on tobacco products.
The revised excise duty structure increases taxes on tobacco across categories, over and above the existing Goods and Services Tax (GST). The move is expected to raise cigarettes and other tobacco products prices, as manufacturers will need to pass on the higher tax cost to consumers.
Following the announcement, ITC witnessed one of its steepest single-day declines in recent times, while Godfrey Phillips India also saw heavy selling pressure. The fall in share prices came amid concerns that higher prices could affect cigarette demand and impact near-term business performance.
The excise duty hike is among the sharpest increases recorded in recent years and further raises the already high tax incidence on cigarettes. This has added pressure on the legal cigarette market, which operates under a tightly regulated and heavily taxed environment.
The government has said the higher excise duty on tobacco products is aimed at boosting revenue and supporting public health goals. The full impact of the tax hike on pricing and consumption is expected to unfold in the coming months.
Expressing “shock and surprise” the Tobacco Institute of India (TII) said the move could severely hurt farmers, small businesses and legitimate industry while significantly boosting illicit trade in tobacco products. Echoing TII concerns, the Federation of All India Farmer Associations (FAIFA) has also raised serious concerns over a steep increase in excise duties on tobacco products, warning that the move could severely impact farmers’ livelihoods, fuel illicit trade, and distort India’s tobacco economy.
. SAS PRP