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Shares of ITC and Godfrey Phillips declined by up to 10% after the government announced a new excise duty on cigarettes, effective February 1. The policy move triggered concerns over pricing, demand, and margin pressures in the tobacco sector.
Cigarettes, tobacco, and similar products will attract a goods and services tax (GST) rate of 40% from next month.
The Finance Ministry ordered that “excise duty will be imposed in the range of Rs. 2,050-8,500 per thousand sticks based on the length of the products from February 1.”
The announcement on Wednesday (December 31, 2025) could raise cigarette prices and affect sales for ITC and other cigarette producers.
The new levies on tobacco will be in addition to the GST rate. It will replace the compensation cess currently levied on such sin goods, according to the PTI report.
Parliament approved the Central Excise (Amendment) Bill 2025 in December. It replaces a temporary levy on cigarettes and tobacco products.
ITC shares cracked as much as 6% on the BSE to hit the 52-week low of Rs. 379. Additionally, a block deal in ITC shares further pressured the stock, according to multiple media reports.
CNBC reported that 4.03 crore shares (0.31% equity) worth Rs. 1,614.5 crore changed hands at Rs. 400 apiece.
In the last year, ITC shares have tumbled 17%, while they are down 9% in six months. The company, which is part of the Sensex and Nifty indices, has a market capitalization of over Rs. 4,75,000 crore.
Shares of Godfrey Phillips fell 10% and tumbled to the day's low of Rs. 2483.15 on the BSE. The stock has gained 48.90% over the past year.
For smokers and investors alike, the new year started with a sharp pinch. Smoke may be rising, but profits are clearly under pressure.
ITC was the biggest loser on the Nifty 50 and led declines on the FMCG index, which fell 3.2%. In contrast, Godfrey Phillips faced its steepest fall since November 2016.
According to ICICI Securities, the new duty will raise the cost of 75–85 mm cigarettes by 22–28%. The report added, “Cigarettes longer than 75 mm account for roughly 16% of ITC's volumes and are likely to see price increases of 2–3 rupees per stick as a result of the levy.”
Also Read: GST Rate Overhaul: What Gets Cheaper and Costlier from September 22
A Reuters report states, “The total taxes on cigarettes in India currently make up about 53% of retail prices, well below the World Health Organisation benchmark of 75% aimed at discouraging consumption.”
The government is making a strong statement to both smokers and investors. The judicial use of taxes and promotion of larger health warnings are the main means for this government movement.
