- 20 Feb 2025
- ICICIdirect Research
INDIAN GOVERNMENT COULD CONSIDER RAISING GOODS AND SERVICE TAX (GST) ON CIGARETTES AND OTHER TOBACCO PRODUCTS
ITC - 409 Change: -2.90 (-0.70 %)News: According to media reports, Indian government could consider raising goods and service tax (GST) on cigarettes and other tobacco products to 40% once compensation cess is stopped levy on the cigarettes. Cigarette currently face GST of 28% besides cess and other levies resulting total indirect tax of 53%, which is below WHO’s recommendation of 75%. Proposal is to levy GST of highest permissible limit of 40% and top that with an additional excise duty. Government will make sure that tax revenue will not fall short once levying of compensation cess ends, scheduled for Mar,26.
View: The government has not increased taxes/levies on cigarettes for last two year. Last increase was in low single digit in 2023 budget. This aided cigarette companies to gain share from illicit cigarettes. Going ahead if the levy increase is above 7% will have impact on the sales volume due price hikes while less than 7% will get absorbed in the market without having significant impact on the sales volume.hence We need to monitor how much the increase in levys/taxes on cigarettes would be after the proposed changes implemented by the government.
Impact: Negative