Tobacco Stocks
Tobacco stocks crushed as govt slaps fresh excise duty from Feb 1
Mumbai/IBNS: Shares of cigarette and tobacco product manufacturers fell sharply in early trade on Thursday (January 1) after the central government imposed an additional excise duty on tobacco products, effective February 1, media reports said.
Stocks of leading cigarette makers Godfrey Phillips India and ITC declined nearly 10% and 6.11 per cent respectively on the BSE Sensex.
The new levy will be imposed over and above the Goods and Services Tax (GST) and will replace the compensation cess currently applicable to sin goods, according to official notifications.
Under the revised tax structure, tobacco products will attract a GST rate of 40 per cent, while beedis will be taxed at 18 per cent from February 1.
Late on Wednesday, the Union Finance Ministry notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026.
As per Section 3A of the Central Excise Act, manufacturers will be required to pay excise duty based on the determined annual production capacity of their packing machines.
However, pending verification of declarations, manufacturers must pay duty based on the retail sale price (RSP) of the pouches produced during the month and the maximum rated speed of the packing machine, measured in pouches per minute.
For instance, if a packing machine producing chewing tobacco has a maximum rated capacity of 500 pouches per minute and an RSP of Rs 2, the applicable duty per machine per month will be Rs 0.83 crore.
If the RSP is Rs 4 for the same machine capacity, the duty will rise to Rs 1.52 crore per month, with the higher of Rs 0.83 crore or 0.38 times the RSP being applied.
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