ITC, Godfrey Phillips Share Prices Slide On Proposed Higher GST Rate For Tobacco Products
The proposal was made by the Group of Ministers on GST rate rationalisation, chaired by Bihar’s Deputy Chief Minister Samrat Chaudhary.
Shares of major tobacco companies declined in early trade on Tuesday, following reports of a proposal to tax sin goods, including cigarettes and tobacco products, at 35% under the Goods and Services Tax framework.
Stocks of leading tobacco players such as ITC Ltd., Godfrey Phillips Ltd., and VST Industries Ltd. dropped as much as 3% in trade today, reacting to the news that the GST Council may consider increasing the tax on cigarettes, aerated beverages, and other such products to 35%, up from the current 28%.
As of 01:45 p.m. today, Indian Wood Products Co. fell the most among tobacco stocks, down 2.16% at Rs 57.48. ITC was down 1.25%, trading at Rs 471.25, Godfrey fell 1.16%to Rs 5,690.30, and VST Industries was down 0.17% at Rs 325.
The GST hike proposal was made by the Group of Ministers on GST rate rationalisation, chaired by Bihar’s Deputy Chief Minister Samrat Chaudhary. The GoM’s recommendations are expected to be presented before the GST Council at its upcoming meeting on Dec. 21, 2024.
Sources familiar with the discussions revealed to NDTV Profit that the GoM has suggested treating sin goods like tobacco, cigarettes, and aerated beverages differently under the GST regime.
The proposed hike in the GST on tobacco and related products has raised concerns among industry stakeholders, as it could impact sales and profits for tobacco manufacturers.
Currently, the GST system in India has a four-tier tax structure, with rates at 5%, 12%, 18%, and 28%. While essential goods such as food and healthcare are exempt, luxury and demerit goods like tobacco products are taxed at the highest 28% rate.
Under the proposed changes, "sin goods" would face a higher tax burden as part of a broader effort to rationalise rates across a range of goods, with more items potentially moving into the 28% tax bracket.
The panel’s proposals also include adjustments to taxes on nearly 150 products, such as readymade garments and other consumer goods. The recommendations will help decide the future of the compensation cess, which is set to end in March 2026. These moves are part of a wider GST reform plan, which also includes earlier proposals such as reducing GST on bicycles and packaged drinking water.
Earlier today, exchanges sought explanation from ITC and Godfrey Phillips for the drop in their stocks on account of the proposed GST hike on sin goods. Both companies said they were unable to comment on the matter as it is not attributable to any event or information emanating from the company.
Addition: Updated the copy with ITC and Godfrey Phillips comments.
