Tue Dec 03 07:30:11 UTC 2024: ## Tobacco Stocks Plunge on Proposed GST Hike
**Mumbai, December 3, 2024** – Shares of major tobacco companies in India experienced a significant downturn on Tuesday following reports of a potential Goods and Services Tax (GST) increase on cigarettes and related products. ITC, India’s largest cigarette manufacturer, saw its shares fall by 3%, impacting brands like Insignia, Classic, Gold Flake, and others. Godfrey Phillips, known for Marlboro cigarettes, also suffered a 3% drop in early trading, with VST Industries experiencing similar pressure.
The decline follows a recommendation by a ministerial group (GoM) to raise the GST rate on cigarettes, aerated beverages, and related products from the current 28% to 35%. While the GoM’s proposal aims to rationalize GST rates, experts warn that a higher tax could lead to decreased sales due to increased consumer cost, impacting company revenue. Furthermore, it could drive consumers towards cheaper, potentially counterfeit, alternatives.
ITC’s annual report for FY2024 highlighted a concerning trend: disproportionate taxation on cigarettes has led to increased consumption of duty-paid cigarettes alongside a surge in untaxed or less-taxed tobacco products like illegal cigarettes, bidis, and chewing tobacco.
Although Finance Minister Nirmala Sitharaman did not announce any tobacco tax changes in the July 23rd budget, the last tax increase occurred in February 2023, at which point the rates rose by 2%. The GoM’s recommendation will now be considered at the GST Council meeting on December 21st, chaired by Sitharaman, where the final decision on any rate changes will be made.
First Piper 