Tobacco stocks, including ITC and Godfrey Phillips, declined on Monday after reports suggested that the government is planning steep new taxes on cigarettes, tobacco products, and pan masala. 

Market Reaction: ITC, Godfrey Phillips Slip

• ITC share price fell 0.85% to ₹400.8
• Godfrey Phillips share price dropped 1.05% to ₹2,842.90
• VST Industries share price traded slightly higher at ₹255.25

Investors reacted cautiously as tobacco companies are highly sensitive to tax-related announcements.

Proposed Cess: Sharp Increase on Cigarettes

The reported recommendations include a cess of ₹2,700–11,000 per 1,000 cigarettes, depending on the size:

• ₹3,000 per 1,000 cigarettes for up to 65mm filter sticks
• ₹4,500 per 1,000 cigarettes for 65–70mm sticks
• 25% cess proposed on cigars and cheroots

For pan masala manufacturers, the cess may be based on machine capacity.

Two Major Tax Bills Coming Up in Lok Sabha

The government is expected to introduce 2 important bills on Monday:

1. Central Excise Amendment Bill, 2025

This bill aims to replace the existing GST compensation cess on cigarettes and other tobacco products. It would give the Centre more flexibility to raise excise duties once the GST compensation period ends.

2. ‘Health Security se National Security’ Cess Bill, 2025

This proposes a new dedicated cess on the production of specific goods, including pan masala. If approved, it could significantly change the sector’s tax structure.

Also Read: NSE Revises Quantity Freeze Limits for Fin Nifty: What You Need to Know?

Why These Developments Matter

Tobacco stocks often move sharply when tax hikes are discussed. Higher duties can impact pricing, demand, and profitability. Investors are closely following the government’s decisions as both bills move through Parliament.

Conclusion

The market reacted quickly to reports of higher taxes on tobacco products, with ITC and Godfrey Phillips seeing early declines. As the government prepares to table new excise and cess bills, investors will watch for more clarity on how the potential tax changes could affect the tobacco and pan masala industries.

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