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05-01-2026
Bureau Report
NEW DELHI: Shares of Indian tobacco companies slumped after the government imposed a new tax on cigarettes, making them costlier for an estimated 100 million smokers in the world’s most populous country.
ITC, opens new tab, maker of Gold Flake and the market leader, fell 9.2%, while Godfrey Phillips India, opens new tab, the distributor of Marlboro in the country, tanked 14.1%.
Shares of ITC were trading at 365.50 rupees, their lowest level since April 2023, and were also on track for their worst day in nearly six years. Godfrey Phillips was set for its steepest fall since November 2016.
ITC was the biggest loser on the Nifty 50 index, opens new tab and also led declines on the FMCG index, opens new tab, which was trading 3.2% lower.
India’s finance ministry late on Wednesday notified an excise duty of 2,050–8,500 rupees ($22.82–$94.60) per 1,000 sticks, depending on cigarette length, effective February 1.
Jefferies analysts called the move “a clear negative,” saying it would hurt sales volumes and revive concerns about losing share to the illicit industry.
Health issues tied to smoking are seen as a major drain on India’s resources and the government has introduced steps including larger warning labels and periodic tax adjustments, to curb consumption.
While the government has not specified the impact of the duty change on retail prices, analysts say higher taxes could prompt companies to raise prices.
The duty translates into a 22%-28% increase in overall costs for 75-85 mm cigarettes, analysts at ICICI Securities said.
“Cigarettes longer than 75 mm account for roughly 16% of ITC’s volumes and are likely to see price increases of 2–3 rupees per stick as a result of the levy,” they said.
The new tax will apply in addition to the existing 40% Goods and Services Tax, the order showed. India has imposed an excise duty on cigarettes in a range of 2,050-8,500 rupees ($22.8-$94.5) per thousand sticks based on the length of the products, effective February 1, the finance ministry said in an order late on Wednesday.
The move could increase prices of cigarettes for an estimated 100 million smokers in the world’s most populous country.
In December, the Indian government approved a new law, the Central Excise (Amendment) Bill 2025 that replaces a temporary levy on cigarettes and tobacco products. The excise duty would be imposed on cigarettes in addition to a 40% goods and services tax, the order issued late on Wednesday showed.
Total taxes on cigarettes in India currently make up about 53% of retail prices, well below the World Health Organization benchmark of 75% aimed at discouraging consumption. This includes a 28% goods and services tax and additional value based levy based on the size of the cigarettes.
The higher levies could impact sales of cigarettes manufacturers like ITC, opens new tab and Godfrey Phillips India, opens new tab.
ITC Limited is a diversified conglomerate in India with businesses spanning FMCG (Fast-Moving Consumer Goods), hotels, paperboards, packaging, agribusiness, and information technology. Known for popular brands like Aashirvaad, Sunfeast, and Classmate, ITC plays a significant role in multiple sectors, contributing to economic growth and sustainability initiatives.
Godfrey Phillips India is a leading tobacco manufacturer, producing popular cigarette brands like Four Square and Red & White. Apart from tobacco, the company has diversified into tea, confectionery, and retail.
