Tobacco stocks fall as higher tax sets to take effect on Feb 1
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New Delhi: Marking a steep downward spiral, shares of cigarette and tobacco manufacturers fell on Thursday, Free Press Journal reported.
The fall comes as the Centre sets to make higher excise duties on tobacco products effective on February 1 alongside introducing a health and national security cess on pan masala.
This is the fresh jolt to the sector, which has already been weighed down by heavy taxation.
Following a late-night notification from Finance Ministry on Wednesday, broad-based selling triggered across the sector with losses deepening ‘through the session as investors reassessed earnings prospects’.
As the situation spiraled, the country’s largest cigarette maker and producer ITC,which brings out the brand the Gold Flake fell nearly 10 per cent to Rs 363.95.
Godfrey Phillips India, which markets Marlboro in India, saw its shares sliding 17 per cent to close at Rs 2,289.65 after falling as much as 19 per cent earlier.
Alongside, shares of VST Industries came down marginally at Rs 255.15.
Meanwhile, analysts warns that repeated tax hike could lead to down-trading and illicit consumption in a country home to an estimated to have over 120 million smokers.
Cigarettes under the revised structure will have excise duty ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on ‘length and the presence of filters’.
When it comes to smokeless tobacco products, levies could go even higher including ‘91 per cent excise duty on gutkha and 82 per cent each on chewing tobacco and jarda scented tobacco’, according to The Free Press Journal.