Mumbai, Jan 1 Shares of major cigarette makers fell sharply on Thursday after the government announced a fresh excise duty on cigarettes, a move that is expected to push up prices and impact sales.
Stocks of ITC and Godfrey Phillips dropped by as much as 19 per cent during the intra-day’s trade on Thursday.
According to a government order, the new excise duty will come into effect from February 1.
The duty has been fixed in the range of Rs 2,050 to Rs 8,500 per thousand cigarette sticks, depending on the length of the cigarettes.
This additional tax is likely to make cigarettes more expensive, which could hurt demand and weigh on the earnings of cigarette companies.
Following the announcement, ITC shares fell up to 10 per cent on the BSE and hit a 52-week low of Rs 362.70.
The stock also came under pressure due to a large block deal reported during the session, which added to the selling momentum.
Over the past one year, ITC shares have declined 17 per cent and are down 9 per cent in the last six months.
The company remains one of the heavyweight stocks in the benchmark indices, with a market capitalisation of over Rs 4.75 lakh crore.
Godfrey Phillips shares saw an even steeper fall. The stock tumbled nearly 19 per cent to touch the day’s low of Rs 2,230.15 on the BSE.
Despite the sharp fall on Thursday, the stock is still up nearly 49 per cent over the past one year.
The new excise duty on cigarettes will be levied over and above the goods and services tax. As per the new structure, cigarettes, tobacco and similar products will attract a GST rate of 40 per cent from next month.
The excise duty will replace the compensation cess that was earlier imposed on these products.
The change follows Parliament’s approval of an amendment law in December that replaces the temporary levy on cigarettes and tobacco products.
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