India Tobacco Stocks Fall After New Excise Duty
Shares of Indian tobacco companies fell sharply after the government announced a new excise duty on cigarettes, adding to the existing goods and services tax regime. The duty, which will come into effect from February 1, 2026, applies per 1,000 cigarette sticks and varies by cigarette length. This move effectively reintroduces a central levy on cigarettes following changes to earlier compensation cess mechanisms. The government has positioned the measure as part of its broader public health and revenue strategy.
Tobacco companies see sharp market reaction
ITC, India’s largest cigarette manufacturer, saw its shares drop around 4 percent in early trading following the announcement. Godfrey Phillips India recorded steeper losses, with its stock falling by nearly 7 to 8 percent. The decline in tobacco stocks also weighed on the wider FMCG segment, as investors assessed the potential impact of higher taxes on volumes, pricing, and profitability.
Higher prices likely for consumers
Market analysts said the additional excise duty could lead to a significant increase in cigarette prices, particularly in popular mid length segments. Companies may choose to pass on the higher tax burden to consumers, which could affect demand over time. India has over 100 million smokers, and the government has repeatedly used taxation as a tool to discourage tobacco consumption while safeguarding fiscal revenues.
