Will ITC and Godfrey Phillips Recover After Falling to 52-Week Lows Due to New Excise Duty?
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Synopsis
Shares of ITC and Godfrey Phillips have taken a hit following the government's announcement of a new excise duty on cigarettes, effective February 1. This development raises concerns about rising prices and declining sales in the cigarette market, making it a critical issue for investors and consumers alike.
Key Takeaways
- ITC and Godfrey Phillips stocks fell sharply due to new excise duty announcement.
- Excise duty ranges from Rs 2,050 to Rs 8,500 per thousand cigarettes.
- ITC hit a 52-week low of Rs 362.70.
- Godfrey Phillips shares tumbled nearly 19 percent.
- New excise duty adds to existing 40 percent GST on cigarettes.
Mumbai, Jan 1 (NationPress) The shares of prominent cigarette manufacturers experienced a significant downturn on Thursday following the government's announcement of an impending excise duty on cigarettes, set to take effect next month. This change is anticipated to elevate prices and negatively influence sales.
During intra-day trading on Thursday, the stocks of ITC and Godfrey Phillips plummeted by as much as 19 percent.
As per the government directive, the new excise duty will commence on February 1.
The duty is established between Rs 2,050 to Rs 8,500 per thousand cigarette sticks, varying based on cigarette length.
This additional taxation is projected to increase cigarette prices, potentially diminishing demand and adversely affecting the profitability of cigarette manufacturers.
In the wake of this announcement, ITC shares fell by up to 10 percent on the BSE, reaching a 52-week low of Rs 362.70.
The stock also faced pressure due to a significant block deal reported during the trading session, which exacerbated the selling activity.
Over the past year, ITC shares have witnessed a decline of 17 percent, with a 9 percent drop noted in the last six months.
The company continues to be one of the heavyweight stocks on benchmark indices, boasting a market cap exceeding Rs 4.75 lakh crore.
Godfrey Phillips shares experienced an even sharper decline, with the stock dropping nearly 19 percent to a day’s low of Rs 2,230.15 on the BSE.
Despite this steep decline on Thursday, the stock remains up nearly 49 percent over the past year.
The new excise duty on cigarettes will be applied in addition to the goods and services tax. Under the new framework, cigarettes, tobacco, and similar products will incur a GST rate of 40 percent starting next month.
This excise duty will replace the previously imposed compensation cess on these products.
This adjustment follows the parliamentary approval of an amendment law in December, which replaces the temporary levy on cigarettes and tobacco products.
Point of View
I emphasize the importance of understanding the implications of government policy on the financial markets. The recent announcement regarding the excise duty on cigarettes not only affects the companies involved but also has broader economic repercussions. It's crucial for stakeholders to stay informed and adapt to these changes.
NationPress
05/01/2026
Frequently Asked Questions
What is the new excise duty on cigarettes?
The new excise duty, effective from February 1, ranges from Rs 2,050 to Rs 8,500 per thousand cigarette sticks, depending on the length of the cigarettes.
How have the stocks of ITC and Godfrey Phillips reacted?
Shares of ITC fell to a 52-week low, dropping by up to 10 percent, while Godfrey Phillips experienced a nearly 19 percent decrease in stock price during the same trading session.
What impact will the excise duty have on cigarette prices?
The additional excise duty is expected to increase the prices of cigarettes, which could reduce demand and negatively impact the earnings of cigarette companies.
What is the GST rate on tobacco products starting next month?
Starting next month, cigarettes, tobacco, and similar products will attract a GST rate of 40 percent.
Why was the excise duty introduced?
The excise duty was introduced following the parliamentary approval of an amendment law in December that replaces the temporary levy on these products.
