Tobacco stocks tumble! New GST rates for sin goods weigh down shares; ITC falls 8%, Godfrey down Rs 400

Tobacco stocks saw a sharp sell-off on Thursday after the finance ministry formally notified February 1 as the date for imposing additional excise duty on tobacco products, along with a health cess on pan masala. Shares of Godfrey Phillips India plunged as much as 10% in morning trade, while ITC fell over 8%.On the BSE, Godfrey Phillips India was trading at Rs 2295, down 16% or 465 points. ITC also plunged 8% to trade at Rs 368 around 12:35 PM. The fall followed a notification by the finance ministry, which announced fresh excise duty rates on cigarettes in the range of Rs 2,050 to Rs 8,500 per 1,000 sticks, based on the length of cigarettes. Under the new framework, the additional levies on tobacco and pan masala will be charged over and above the Goods and Services Tax (GST). These will replace the existing GST compensation cess, which is currently imposed on ‘sin goods.‘ According to the notification, pan masala, cigarettes, tobacco and similar products will attract a GST rate of 40%, while bidis will be taxed at 18%. Alongside this, pan masala will have a Health and National Security Cess while tobacco and related products will face an extra excise duty. After the implementation, cigarette makers like ITC and Godfrey Phillips India will be forced to raise prices, ET reported. The move follows the government’s approval in December of the Central Excise (Amendment) Bill, 2025, which replaces a temporary levy on cigarettes and tobacco products. An order issued late on Wednesday clarified that excise duty will be imposed on cigarettes in addition to the 40 per cent GST. At present, taxes make up about 53% of the retail price of cigarettes in India, including a 28% GST and a value-based levy linked to cigarette length. This is significantly lower than the World Health Organization’s recommended benchmark of 75%, aimed at curbing tobacco consumption. Separately, the finance ministry also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, on Wednesday.