ITC, Godfrey Phillips shares crack up to 8% on New Year’s Day. What’s the bad news?

Shares of tobacco stocks such as ITC and Godfrey Phillips fell up to 8% on Thursday morning after the finance ministry notified February 1 as the effective date for levying additional excise duty on tobacco products. ITC shares declined 4.5% to an intraday low of Rs 385, while Godfrey Phillips tumbled 8% to Rs 2,540.15 on the BSE.

Late on Wednesday, the finance ministry notified an excise duty of Rs 2,050–8,500 per 1,000 sticks, depending on cigarette length, effective February 1.

The new levies on tobacco and pan masala will be imposed over and above the GST rate and will replace the compensation cess currently levied on these sin goods. The existing GST compensation cess, charged at varied 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 Cess will be levied on pan masala, while tobacco and related products will attract an additional excise duty.

The higher levies could impact cigarette makers such as ITC and Godfrey Phillips India, as companies may be forced to raise prices.In December, the Indian government approved the Central Excise (Amendment) Bill, 2025, which replaces a temporary levy on cigarettes and tobacco products.As per an order issued late on Wednesday, excise duty will be imposed on cigarettes in addition to the 40% GST.

Total taxes on cigarettes in India currently account for about 53% of retail prices, well below the World Health Organization benchmark of 75% aimed at discouraging consumption. This includes a 28% GST and an additional value-based levy linked to cigarette length.