Shares of cigarette makers ITC Ltd and Godfrey Phillips India came under sharp selling pressure on Thursday, January 1, after the government announced a fresh excise duty on cigarettes, effective from February 1, 2026.
According to a Finance Ministry notification issued late Wednesday, the excise duty will be levied in the range of ₹2,050 to ₹8,500 per thousand sticks, depending on the length of the cigarette.
Following the announcement, ITC shares declined as much as 4.14% on the BSE, hitting an intraday low of ₹386.30. Shares of Godfrey Phillips India slid up to 8%, touching a low of ₹2,540.15 during the session.
Market sentiment around ITC was further dented by reports of a large block deal. As per media reports, including CNBC-TV18, around 4.03 crore ITC shares, representing 0.31% equity, were traded at an average price of ₹400 per share, amounting to approximately ₹1,614.5 crore.
Tax structure changes for tobacco products
The newly announced excise duty will be over and above the Goods and Services Tax (GST) applicable on tobacco products. It will replace the existing compensation cess, which is currently levied on cigarettes and other sin goods, according to a PTI report.
From February 2026 onwards, cigarettes, tobacco and related products will attract a GST rate of 40%, along with the newly introduced excise duty, significantly increasing the overall tax burden on the sector.
Market impact
Analysts note that higher taxation could pressure cigarette manufacturers’ margins and volumes, while also impacting investor sentiment toward tobacco stocks in the near term.
Quick Read
What happened?
The government imposed a new excise duty on cigarettes, effective February 1, 2026.
How much is the duty?
₹2,050–₹8,500 per thousand sticks, depending on cigarette length.
Market reaction
ITC fell over 4%, while Godfrey Phillips dropped up to 8%.
Why it matters
Higher taxes may hit cigarette demand, profitability, and stock valuations.
Disclaimer : This news article is for informational purposes only and does not constitute investment advice. Stock prices react to multiple factors, including policy changes and market sentiment. Investors are advised to consult certified financial advisors before making investment decisions.
