Shares of ITC and Godfrey Phillips rise up to 19% on New Year’s Day. What’s the bad news?

Shares of tobacco stocks such as ITC and Godfrey Phillips fell as much as 19% on Thursday morning after the Treasury Department notified February 1 as the effective date for imposing additional duties on tobacco products. ITC shares fell 10% to an intraday low of Rs 362.7, while Godfrey Phillips fell 19.2% to Rs 2,230.15 on the BSE.Late on Wednesday, the Finance Ministry announced an excise duty of Rs 2,050-8,500 per 1,000 sticks, depending on the length of the cigarettes, with effect from February 1.

The new duties on tobacco and pan masala will be imposed on top of the GST rate and will replace the compensation tax currently levied on these sin goods. The existing GST compensation tax, which is charged at different rates, will cease to exist from February 1.According to a government notification, pan masala, cigarettes, tobacco and similar products will attract a GST rate of 40%, while bidis will be taxed at 18% under the Goods and Services Tax (GST).

In addition, a health and national security tax will be levied on pan masala, while tobacco and related products will be subject to additional excise duties.

The higher duties could impact cigarette makers such as ITC and Godfrey Phillips India as companies may be forced to increase their prices.

In December, the Indian government passed the Central Excise (Amendment) Bill, 2025, which replaces a temporary levy on cigarettes and tobacco products. According to an order issued late on Wednesday, excise duty will be levied on cigarettes in addition to the 40% GST.

India’s total taxes on cigarettes currently represent about 53% of retail prices, well below the World Health Organization’s benchmark of 75%, designed to discourage consumption. This includes a 28% GST and an additional value-based levy linked to the length of the cigarette.

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