GST 2.0 Impact on ITC: What Lower FMCG Taxes and Higher Tobacco Levies Mean

The spotlight has turned to ITC Limited, the Kolkata-based conglomerate, after the GST Council announced a major overhaul of India’s indirect tax structure on September 3. The Council approved a simplified GST regime, reducing four slabs (5%, 12%, 18% and 28%) to just two 5% and 18% effective September 22, coinciding with the first day of Navratri.

Let’s take a closer look at three key developments from the GST overhaul and how they could impact ITC Group.

1. GST Cut on Food and FMCG Items

Everyday foods and beverages such as butter, ghee, nuts, cheese, jams, fruit juices, ice cream, biscuits, and cereals will see tax rates reduced from 12–18% to 5%.

Additionally, FMCG items like toothpaste, toothbrushes, soaps, shampoos, hair oil, and talcum powder will now attract only 5% GST, down from 18%. This is a positive for ITC’s FMCG business, which operates across packaged foods, personal care, and household products.

2. GST Relief for Stationery Products

The Council has cut GST to nil on several educational essentials including pencils, crayons, sharpeners, exercise books, globes, maps, and notebooks.

Geometry boxes, colour boxes, and mathematical sets will now be taxed at 5% instead of 12%. This is a boost for ITC’s Classmate and Paperkraft brands, which cater to students and professionals.

3. Higher GST on Tobacco and Cigarettes

On the flip side, the Council kept a 28% GST plus compensation cess on cigarettes, gutkha, and other tobacco products, until state compensation loans are repaid. At the same time, it proposed a special 40% slab for items including high-end cars and tobacco.

This remains a headwind for ITC, as its cigarette division generated ₹32,631 crore in FY2024–25, accounting for about 44% of total revenue. Any increase in tax burden on tobacco products could directly hit profitability in this segment.

ITC Share Price Performance

Despite being in the spotlight after the GST announcements, ITC’s stock has shown muted movement in recent months. Over the past six months, the share price has inched up only 0.72%. In contrast, it has slipped 1.59% over the last 30 days and edged lower by 0.20% in the past five trading sessions.

Read More: GST Reforms 2.0: Why Have Bidis Attracted an 18% Tax, Unlike Other Tobacco Products?

Conclusion

The GST overhaul presents a mixed bag for ITC. While lower rates on FMCG and stationery items may support sales growth, the continued high taxation on tobacco products poses risks to its largest revenue driver. Investors will be watching closely to see how ITC balances these contrasting forces in the coming quarters.

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