'New Year Shock for Cigarette Stocks': ITC, Godfrey Phillips Sink After Govt Hikes Excise Duty

The Indian government announced a new excise duty on cigarettes, causing a sharp decline in the stock prices of major manufacturers. Shares of ITC and Godfrey Phillips sank, with ITC hitting a 52-week low after a 6% drop.

The New Year didn't begin on a happy note for cigarette makers. As markets opened on January 1, shares of ITC and Godfrey Phillips India were battered after the government announced a fresh excise duty on cigarettes, set to kick in from February 1.

For investors, the message was clear: higher taxes are coming, and they could hit both sales and profits.

What the Government Changed Overnight

Late Wednesday, the Finance Ministry notified that cigarette makers will now have to pay an excise duty ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on the length of the cigarette.

This duty will be in addition to the existing 40% GST, meaning smokers may soon have to shell out more at the counter and companies could struggle to pass on the entire cost.

ITC Slips to a 52-Week Low

ITC, India's largest cigarette manufacturer, was among the worst hit.

The stock cracked nearly 6% to touch a fresh 52-week low of Rs 379 on the BSE. The pain deepened after reports of a massive block deal surfaced, with around 4.03 crore shares said to have changed hands at about Rs 400 each, in a transaction worth over Rs 1,600 crore.

Over the last year alone, ITC has lost 17%, a tough phase for a stock that was once seen as a defensive favourite.

Godfrey Phillips Takes a Sharper Hit

Godfrey Phillips India saw an even steeper fall, with its shares tumbling nearly 10% to an intraday low of Rs 2,483.15.

The fall is striking because the stock had been on a dream run, delivering almost 49% returns in the past year. Thursday's sell-off shows how quickly sentiment can turn when policy risk enters the picture.

Why This Tax Hike Matters So Much

The new excise duty will replace the compensation cess that was earlier charged on cigarettes and other tobacco products, following Parliament's approval of the Central Excise (Amendment) Bill, 2025.

According to reports, taxes on cigarettes in India currently make up about 53% of the retail price still well below the World Health Organisation’s 75% benchmark meant to curb smoking.

With this hike, the government is clearly nudging that number higher but the immediate cost is being borne by cigarette stocks on Dalal Street.