Cigarettes Companies Trade Lower

The share price of ITC dropped 1.9% and was trading at Rs 330.8, Godfrey Phillips India declined 0.9% to Rs 1,248.45 and VST Industries also reduced 0.8% to Rs 3,600 in morning hours of Monday’s trading session.

The drop-in share price of cigarette manufacturing companies is on the back of speculations that the government may consider hiking the compensation cess on cigarettes if prices come down post the implementation of the Goods and Services Tax (GST).

After implementation of GST, cigarettes fall in the highest 28% bracket and attract an additional cess depending on their length. However, the effective levy is about 8% lower than earlier, as per leading research agencies. This is mostly due to the drop of additional excise duty under GST regime.

However, cigarette manufacturing companies are yet to revise prices post GST. If the price of cigarettes come down, the government may not look at levying central excise duty but may consider increasing the cess on the demerit good.

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About Suhani Varma