Despite a proposed 40% GST on tobacco products, shares of ITC, Godfrey Phillips, and VST Industries saw a surge. The GST Council clarified that the existing 28% GST and the compensation cess will remain in effect until pending dues are settled. This has boosted investor confidence in cigarette companies' stocks.
ITC Share Price: Following the GST Council's clarification on tobacco products, the shares of ITC, Godfrey Phillips, and VST Industries experienced a rally. On September 4th, ITC's shares rose by over 3% to reach Rs 427. The current 28% GST and compensation cess will continue until the outstanding dues are cleared, after which the revised 40% GST will be implemented. This move has bolstered investor confidence in the tobacco sector.
GST Council Provides Clarity
However, the GST Council recently provided clarity regarding the tax structure on tobacco products. The Council stated that the existing 28 percent GST and compensation cess structure will remain in place until the pending compensation-related dues are fully settled. Only then will the revised 40 percent GST slab, based on the retail sale price (RSP), be implemented.
Following this clarification, investors breathed a sigh of relief, and the shares of cigarette companies witnessed a rally. ITC, Godfrey Phillips, and VST Industries' stocks surged in the stock market, increasing investor confidence.
Good News for Tobacco Companies
Market expert Ambarish Baliga believes this move is positive for tobacco companies. He stated that currently, the total of 28 percent GST and cess on tobacco and cigarettes is around 50-53 percent. If compensation cess collection is completed after March 2026, it will not be implemented. In such a scenario, no additional charges will be levied beyond the revised 40 percent GST rate, which is a good sign for the cigarette sector.
According to experts, this clarification will also enable companies to prepare their financial projections more accurately. Investors will now know the form in which tax rates will be applicable, and stock prices can be determined based on this information.
Market Performance of Cigarette Companies
Major cigarette manufacturers in India include ITC, Godfrey Phillips, and VST Industries. Due to uncertainty surrounding GST rates, the shares of these companies had previously seen a decline. However, following the GST Council's clarification, the stock market rallied, and investors felt a sense of relief.
Notably, ITC's shares recorded a gain of over 3 percent on September 4th. Godfrey Phillips and VST Industries also witnessed similar rallies in their share prices. This indicates that investors now consider these companies' stocks attractive.
Impact of GST Reforms
GST reforms have had a direct impact on the shares of cigarette companies. News of a 40 percent tax had caused concern among investors. However, the Council's clarification revealed that the existing structure would remain in place until pending compensation amounts are fully paid. This led investors to invest in the shares with confidence.
Experts suggest that stability in the tax structure for the cigarette sector is a positive sign for investors. It will not only simplify revenue planning for companies but also bring stability to the market.
Status of the Tobacco Industry
The tobacco industry in India is quite large, encompassing cigarettes, gutkha, and other tobacco products. Tax rates on these products have always been a subject of discussion. In recent times, there has been uncertainty among investors regarding GST and cess, which has affected stock prices.
However, the GST Council has now boosted investor confidence by providing clarity. Industry experts believe this move will be positive for companies manufacturing tobacco products, and investors can now look to buy these stocks.
