- By Aditya Pratap Singh
- Thu, 20 Feb 2025 12:04 PM (IST)
- Source:JND
Shares of leading tobacco companies fell sharply during the intraday trade on February 20 after reports that the Goods and Services Tax Council may increase GST on cigarettes and other tobacco products. According to a report in the Economic Times, the proposal is likely to be implemented once the compensation cess on these products is removed.
At around 11:52 am, the share price of ITC was trading at Rs 402.05, down 1.07% on NSE, while shares of Godfrey Phillips were down 5% at Rs 6,226.70. The VST share price was trading at was down 288.45, down 3.67 per cent compared to the previous day's closing price.
Increasing taxes on cigarettes could affect their sales, with price-sensitive consumers perhaps opting to smoke less, thus affecting the volumes of these establishments.
Also Read: Stock Market Today: Sensex, Nifty Fall In Early Trade On Tariff Concern, Weak Asian Market
No change in taxation in Budget 2025
There is no change in tobacco tax in the Union Budget 2025, maintaining a stable tax regime for the industry. The last increase was a token 2% increase in February 2023. Cigarettes and other tobacco products fall under the 28% GST; However, the total tax burden is basically over 53% due to the added cess levy.
Proposals in the council include raising the GST rate to 40%, the maximum allowed, as well as additional excise duty, aimed at ensuring government revenue from the tobacco sector stabilizes by March 31, 2026, once the compensation cess is phased out.
Currently, the excise duty on cigarettes up to 65mm is Rs 5 per 1,000 sticks, with longer filter cigarettes having higher rates. The National Calamity Contingent Duty (NCCD), imposed from 2023, ranges from Rs 230 to Rs 850 per 1,000 sticks depending on size, filter type, and flavour.
A ministerial panel within the GST Council is set to review the proposed tax changes before making recommendations, with the final decision resting with the council.
