Moneycontrol
Jul 17, 2017 01:06 PM IST | Source: Moneycontrol.com

ITC share price falls 3% on fears of likely increase in cess on cigarette

According to Morgan Stanley, which increased target price on the stock to Rs 395 from Rs 310, the key risk would be sharp increase in cigarette tax in the next Budget (likely February 2018).

 
 
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ITC shares fell nearly 3 percent intraday Monday on fears of likely increase in cess on cigarettes.

Sources told CNBC-TV18 that the Goods and Services Tax (GST) Council is likely to meet today to consider a cess on tobacco.

The council is expected to discuss the impact on cigarette prices post GST rollout as the government already received representations from anti-tobacco lobbies on cigarette prices falling post GST.

It may also review the quantum of cess levied on cigarettes.

After GST rollout, the fall in total tax on tobacco products, which is dangerous to health, is worrisome for the government.

Hence, the Council called urgent meeting today ahead of its next scheduled meeting on August 5 as the decision on cess will be taken quickly,

After the rollout of GST, excise duty has automatically been removed on tobacco products. Now only GST and cess are levied on these products.

GST and cess combined on cigarettes is currently 6-8 percent lower than pre-GST regime.

According to Morgan Stanley, which increased target price on the stock to Rs 395 from Rs 310, the key risk would be sharp increase in cigarette tax in the next Budget (likely February 2018).

Last week CLSA, which has maintained buy rating on the stock, said in its report that ITC already announced a price cut of 1-2 percent on its key cigarette brands to pass on excise benefits to consumers.

At 11:26 hours IST, the stock price was quoting at Rs 328.55, down Rs 8.65, or 2.57 percent on the BSE.
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