Tobacco Stocks Fall as India Imposes New Tax on Cigarettes
ITC, maker of Gold Flake and the market leader, dropped 4.4%, while Godfrey Phillips India, the distributor of Marlboro in the country, declined 7.7%
Shares of Indian tobacco companies fell on Thursday after the government imposed a new tax on cigarettes, making them costlier for an estimated 100 million smokers in the world's most populous country.
ITC, maker of Gold Flake and the market leader, dropped 4.4%, while Godfrey Phillips India, the distributor of Marlboro in the country, declined 7.7%.
Shares of ITC were trading at 385.25 rupees, their lowest level since June 2024, and were also on track for their worst day since February 2022.
ITC was the biggest loser on the Nifty 50 index and also led declines on the FMCG index, which was trading 1.6% lower.
The finance ministry late on Wednesday notified an excise duty of 2,050–8,500 rupees ($22.82–$94.60) per 1,000 sticks, depending on cigarette length, effective February 1.
Health issues tied to smoking are seen as a major drain on India's resources, and the government has introduced steps, including larger warning labels and periodic tax adjustments, to curb consumption.
The duty translates into a 22%-28% increase in overall costs for 75-85 mm cigarettes, analysts at ICICI Securities said.
"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," they said.
The new tax will apply in addition to the existing 40% Goods and Services Tax, the order showed.
The announcement follows the government's approval in December of the Central Excise (Amendment) Bill 2025, which replaces a temporary levy on cigarettes and tobacco products.
While the government has not specified the impact of the duty change on retail prices, analysts say higher taxes could prompt companies to raise prices.
