Cigarettes firms slip on cess hike speculations; ITC down 3%

Shares of cigarettes companies such as ITC, Godfrey Phillips and VST Industries slipped up to nearly 3% on Monday following the news buzz that the GST Council may consider hiking the compensation cess on cigarettes if prices come down post the implementation of the Goods and Services Tax (GST).

The GST Council will meet later today to take stock of the implementation of the new indirect tax regime.   

Reacting to the buzz, ITC hit an intraday low of Rs 327, down 2.9% on the BSE in an otherwise strong market. The stock was the leading loser on Sensex.

Godfrey Phillips and VST Industries also slipped 1.8% and 1.3%, respectively on the BSE.

The government had recently notified that the cigarettes will be exempted of additional excise duty under the GST regime. The move triggered a sharp spurt in the stocks of cigarette firms with ITC crossing the Rs 4 lakh crore market capitalisation earlier in July. However, speculations are abuzz that instead of an additional excise duty, the government may increase the cess on the demerit good.

Under GST, cigarettes have been put under the highest tax slab of 28% along with an additional 5% cess and another cess based on varying length of the cigarettes.