ITC, Godfrey Phillips and VST Industries Shares Extend Fall on Jan 2, 2026, After Excise Duty Increase

Tobacco stocks remained under pressure as markets reacted to the government’s decision to raise excise duties on cigarettes and related products. 

The revised tax framework, effective from February 1, has led to concerns over pricing, demand and margins, resulting in continued selling across major listed cigarette manufacturers during the latest trading session.

Market Reaction to Tax Announcement

Shares of cigarette and tobacco manufacturers declined for a second consecutive session on Friday, January 2. ITC’s stock fell by over 5% in early trade to around ₹345. 

Godfrey Phillips India also traded lower by more than 3%, while VST Industries slipped close to 2% on the NSE. The declines followed sharp losses recorded in the previous session.

Details of the Revised Excise Duty Structure

The government has announced an additional excise duty on cigarettes and other tobacco products, effective February 1.

Under the amended Central Excise Act, excise duty will range between ₹2,050 and ₹8,500 per 1,000 sticks, depending on cigarette length. 

This duty will be applied over and above the existing 40% GST.

Impact on Cigarette Pricing

The revised structure places a higher tax burden on longer and premium cigarettes. 

Short non-filter cigarettes of up to 65 mm will face an additional duty of about ₹2.05 per stick, while short filter cigarettes will attract roughly ₹2.10 per stick. 

Medium-length cigarettes will see an added duty of approximately ₹3.6 to ₹4 per stick, and long cigarettes of 70–75 mm about ₹5.4 per stick.

Pan Masala and Cess Implications

The Finance Ministry has also notified the Health and National Security Cess Act, introducing a capacity-based cess on pan masala manufacturing units from February 1. 

Despite this change, the overall tax burden on pan masala products, including 40% GST, will remain at 88%. The new regime replaces the earlier structure that included 28% GST and a compensation cess.

Scope of the Highest Duty Slab

An “other” category under the revised framework carries a higher duty of ₹8,500 per 1,000 sticks. However, this applies mainly to non-standard or uncommon cigarette formats, with most widely sold brands not falling under this bracket.

Read More: Lok Sabha Clears Central Excise Amendments to Sustain Tax on Tobacco and Pan Masala.

Conclusion

The extension of losses in tobacco stocks reflects investor concerns over the financial impact of higher excise duties. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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