ITC shares fall 10%, Godfrey Phillips down 19% as govt imposes new excise duty on cigarettes

The shares of tobacco companies sharply dropped in trade on January 1 after the government imposed new excise duty on cigarettes.

ITC shares dropped more than 10 percent to Rs 369.20 apiece, leading losses on the Nifty 50 index and pushing down the Nifty FMCG index down more than 3 percent.

Godfrey Phillips India shares meanwhile tumbled 19 percent to Rs 2,230.30 apiece on Thursday. VST Industries shares also dropped over 7 percent.

Central Excise (Amendment) Bill, 2025:

The Parliament in December approved the Central Excise (Amendment) Bill, 2025, clearing the way for a sharp increase in duties on cigarettes and other tobacco products. It replaces a temporary levy on cigarettes and tobacco products.

The excise duty would be imposed on cigarettes in addition to a 40 percent GST, according to an order issued late on Wednesday. The finance ministry notified that an excise duty of Rs 2,050–8,500 per 1,000 sticks, depending on cigarette length, will take effect from February 1.

Total taxes on cigarettes in India currently account for about 53 percent of the retail prices, well below the World Health Organization (WHO) benchmark of 75 percent which is aimed at discouraging consumption. This includes a 28 percent goods and services tax and additional value-based levy based on the size of the cigarettes.

The duty translates into a 22-28 percent 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.

Tobacco stocks:

ITC shares have fallen nearly 10 percent in the past five days, and nearly 12 percent in the past six months. The shares currently have a P/E ratio of 25.02, and a market capitalisation of Rs 4.59 lakh crore.