Shares of cigarette companies ITC and Godfrey Phillips slumped by up to 19% in Thursday's trade (January 1), after the government imposed an excise duty on cigarettes, effective next month onwards.

The excise duty will be imposed in the range of ₹2,050-8,500 per thousand sticks based on the length of the products from February 1, the Finance Ministry order said late on Wednesday.

The move could increase the prices of cigarettes, thus impacting the sales for ITC and other cigarette producers.

ITC hits 52-week low; Godfrey Phillips tanks 10%

Following this announcement, ITC shares cracked as much as 10% on the BSE to hit the 52-week low of ₹362.70.

Additionally, a block deal in ITC shares further pressured the stock, according to multiple media reports. CNBC TV-18 reported that 4.03 crore shares (0.31% equity) worth ₹1,614.5 crore changed hands at ₹400 apiece. Mint could not independently verify this report.

In the last year, ITC shares have tumbled 17% while they are down 9% in six months. The company, which is part of the Sensex and Nifty indices, has a market capitalisation of over ₹4,75,000 crore.

Meanwhile, shares of Godfrey Phillips faced a sharper cut of 19% as they tumbled to the day's low of ₹2230.15 on the BSE. The stock has gained 48.90% in a year.

Excise duty to be over & above 40% GST

The new levies on tobacco will be in addition to the GST rate and will replace the compensation cess currently levied on such sin goods, the PTI report stated. In December, Parliament approved the Central Excise (Amendment) Bill 2025, which replaces a temporary levy on cigarettes and tobacco products.

Next month onwards, cigarettes, tobacco and other similar products will attract a goods and services tax (GST) rate of 40%.

As per a Reuters report, the total taxes on cigarettes in India currently make up about 53% of retail prices, well below the World Health Organisation benchmark of 75% aimed at discouraging consumption.

(With inputs from agencies)

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