ITC's stock slid more than 5% on Friday, hitting a 52‑week low after the government announced higher excise duties on cigarettes, dragging the entire FMCG sector down.
Why ITC Shares Fell
The finance ministry notified changes to the Central Excise Act, raising the duty on cigarettes to between ₹2,050 and ₹8,500 per 1,000 sticks, depending on length. This duty is added on top of the existing 40% GST.
Because of the news, ITC shares dropped to an intraday low of ₹345.25, a level not seen in the past year. In the last two trading days, the stock has fallen more than 14%.
Impact on the FMCG Index
The heavy selling in ITC pulled the Nifty FMCG index down by over 1% for the session, making it the only sector index in the red. Over the past two days the index is down more than 4% and touched a nine‑month low of 52,741.85.
Other FMCG Stocks Feeling the Pressure
- Radico Khaitan: down 3.55%
- United Breweries: down 0.97%
- Nestle India, United Spirits, Marico, Godrej Consumer Products: each slipped up to 1%
Details of the New Tax Structure
In addition to the higher excise duty, the Health and National Security Cess Act now levies a cess on pan‑masala manufacturers. The total tax on pan‑masala, including the 40% GST, stays at 88%.
The previous system of a 28% GST plus a compensation cess on tobacco products has been replaced by this revised structure.
What This Means for Investors
Higher taxes on cigarettes and pan‑masala are likely to squeeze profit margins for companies in the tobacco and related FMCG segments. Investors should watch earnings updates and consider the longer‑term impact on cash flows.
Stocks of other tobacco players, such as Godfrey Phillips India and VST Industries, also fell after the announcement, indicating broader sector sensitivity.
Disclaimer
Remember, this is just an overview and not a prediction. Do your own research or consult a certified financial advisor before making any investment decisions.