ITC, Godfrey Phillips shares tank as additional excise duty, 40% GST notified on cigarettes
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Shares of ITC and Godfrey Phillips tanked 10% and 18%, respectively as the finance ministry issued a notification imposing higher excise duty on cigarettes from February 1, as per provisions of the Central Excise (Amendment) Act, 2025 passed by the parliament in the winter session.
The government notified excise duty of Rs 2050- 8500 per thousand sticks of cigarettes with effect from February 1, compared with ₹5 per 1,000 sticks for most cigarette categories and ₹10 per 1,000 sticks for sticks above 75 mm.
ITC shares nosedived 8% to trade at ₹370.25, while Godfrey Phillips tanked 15.5% to trade at Rs 2333 per share. As per another GST notification, new GST slab of 40% will also be applicable on cigarettes with effect from February 1.
The finance ministry said since the introduction of GST in 2017, the Basic Excise Duty (BED) on cigarettes had remained unchanged for seven years—an unprecedented period of stagnation in India’s tobacco-taxation history.
“During this time, BED continued at a token level of ₹5 per 1,000 sticks for most cigarette categories and ₹10 per 1,000 sticks for sticks above 75 mm. In practical terms, this meant that the excise component per stick was a fraction of a paisa, effectively rendering the BED insignificant as an instrument of public-health taxation,” it said.
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“By comparison, pre-GST excise duty rates ranged from ₹1,585 to ₹2,850 per 100 sticks for non-filter cigarettes and ₹1,585 to ₹4,170 per 100 sticks for filter cigarettes. These rates represented a well-established, calibrated structure that aligned with global norms on tobacco taxation and ensured periodic upward revision to offset inflation, income growth, and rising healthcare costs,” it added.
“Even under the GST regime, Compensation Cess rates remained unchanged from July 2017 to 2024, despite increases in disposable incomes and inflation. According to WHO’s Global Tobacco Control Report, India did not revise specific cess rates even as average retail prices of cigarettes rose at less than half the pace of nominal income growth, thereby making cigarettes more affordable in real terms for certain population groups,” the ministry said.