ITC down 10%, Godfrey Phillips 19% as addl excise duty effective from Feb 1

ITC, Godfrey Phillips and VST Industries fell up to 10 per cent, after Centre notified February 1 as the date from which additional excise duty will be levied on tobacco

Tobacco stocks were trading lower on Thursday, January 1, 2026, after the Centre notified February 1 as the date from which additional excise duty will be levied on tobacco products, and a new cess on pan masala. On top of this, a Health and National Security Cess will be levied on pan masala, while tobacco and related products will attract additional excise duty.

 

At 12:24 PM, shares of ITC were down 9.18 per cent, Godfrey Phillips India fell 17.8 per cent, and VST Industries was down 3.99 per cent. 

 

Intra-day, ITC stock hit lower band and fell 10 per cent, Godfrey Phillips 19.2 per cent and VST Industries 7.2 per cent.

 

The Finance Ministry on Wednesday also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026.

 

Parliament had in December approved two Bills allowing the levy of the new Health and National Security Cess on pan masala manufacturing and excise duty on tobacco.

 

The government on Wednesday notified February 1 as the implementation date for these levies. The current GST compensation cess, which is currently levied at varied rates, will cease to exist effective February 1. 

 

ICICI Securities estimates that the proposed excise duty on cigarettes has been set in a band of ₹2,050 to ₹8,500 per 1,000 sticks, depending on length and filter type. Cigarettes up to 65mm are expected to fall in the lowest slab, while those above 75mm are likely to attract the highest duty.

 

Under the new structure, excise on cigarettes up to 65mm is likely to see either a reduction or no increase, but sticks of 75mm and above could face a 48–50 per cent tax hike. This translates into a 22–28 per cent increase in overall cost for the 75–85mm segment.

 

The brokerage said it is awaiting the final notification to validate these estimates. At first glance, the move appears negative given the steep hike for cigarettes over 75mm. This segment contributes about 16 per cent of ITC’s cigarette volumes and is likely to be affected by the higher duty, potentially necessitating a price increase of around ₹2–3 per stick.

 

That apart, ITC shares were also under pressure after 37.6 million shares or 0.3 per cent equity changed hands through a block deal, according to data compiled by Bloomberg. The buyers and sellers of the transactions were not known at the time of filing this report.