- Cigarette makers may face volume pressure if GST on sin goods rises to 40 percent without cess adjustment.
- Current tobacco tax includes 28 percent GST, compensation cess, specific levies, excise duty, and NCCD, totaling up to 55 percent of retail prices.
- A 40 percent GST slab could increase ITC’s tax burden by 9 to 10 percent, affecting smaller rivals more.
- Cigarette volumes typically withstand low-to-mid single-digit tax hikes, but a double-digit increase could reduce consumption by 4 to 5 percent.
- Past tax hikes and events like the 2017 GST rollout and Covid-19 lockdowns have previously impacted ITC’s volumes.
- Cigarettes are currently taxed through multiple layers, with a potential move to a flat 40 percent GST slab being considered.
- VST Industries is seen as vulnerable due to weak sales and pricing power, while ITC and Godfrey Phillips are better positioned.
- Godfrey Phillips has seen strong performance, while ITC and VST have faced challenges.
- Tobacco stocks are expected to remain volatile until the GST 2.0 structure is clarified.
Source: a2ztaxcorp.net
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
