FM's Budget makes tobacco cos cough

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Union Budget 2010-11 may have come as a negative surprise for tobacco companies.

"Since I quit smoking many years ago, I would urge others to also follow suit, as smoking is injurious to health," Mukherjee, in a light-hearted tone, told Parliament while presenting the Budget.

"To this end, I am making some structural changes in the excise duty on cigarettes, cigars and cigarillos coupled with some increase in rates," he said. "I propose to enhance excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc. In addition, I propose to introduce a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines."

Tobacco companies may choose to may pass on the hike burden to consumers with minor prices increases.

The FM chose not to announce a decision on whether to bring cigarettes under the proposed GST. Tobacco companies would like the minister to leave cigarettes out of the ambit of the GST as that would mean higher taxes.

The year 2009 was a good one for the Indian FMCG sector. Cigarette sales showed strong volumes as the government's stimulus package in the form of reduction in excise duties worked its way through the economy.

Stock Impact

Company Name	Last	Prv	% Chg
	Price	Close
ITC	232.05	247.3	-6.17
Godfrey Phillip	1790	1800	-0.56

 

 

 

India's biggest cigarette manufacturer ITC lost more than 6% post announcement of excise duty hike on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc.