Tobacco Stocks Crash: New “Sin Tax” Hits Cigarettes (2026)
Indian tobacco stocks started 2026 with a massive sell-off today, January 1, after the Finance Ministry notified a significant hike in excise duties on cigarettes and a new health cess on pan masala. Market leader ITC and Godfrey Phillips saw their sharpest intraday declines in years, dragging down the Nifty FMCG index. The new tax […] The post Tobacco Stocks Crash: New “Sin Tax” Hits Cigarettes (2026) first appeared on Business League.
Indian tobacco stocks started 2026 with a massive sell-off today, January 1, after the Finance Ministry notified a significant hike in excise duties on cigarettes and a new health cess on pan masala. Market leader ITC and Godfrey Phillips saw their sharpest intraday declines in years, dragging down the Nifty FMCG index.
The new tax structure, effective from February 1, 2026, aims to bridge the gap toward the WHO’s recommended 75% tax burden on tobacco products.
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1. Market Reaction: The “Sin Stock” Slump
The announcement triggered panic selling across the tobacco sector during the first trading session of the year.
| Company | Share Price (Jan 1) | % Change | Impact Level |
| ITC Ltd | ₹365.50 | -9.2% | Lowest since April 2023 |
| Godfrey Phillips | ₹2,295.00 | -14.1% | Steepest fall since Nov 2016 |
| VST Industries | ₹2,580.00 | +1.1% | Mixed (Largely unaffected) |
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The ITC Factor: Beyond the tax news, ITC’s stock was further pressured by a massive block deal involving approximately 4.03 crore shares (0.31% equity).
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2. The New Tax Structure (Effective Feb 1)
The government is replacing the existing GST Compensation Cess with a more rigid Additional Excise Duty and a Health & National Security Cess.
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Excise Duty: Ranges from ₹2,050 to ₹8,500 per 1,000 sticks, depending on the length of the cigarette.
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GST Rate: Remains fixed at 40% for cigarettes and pan masala, while Beedis will be taxed at 18%.
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Total Tax Burden: Analysts estimate the effective tax on retail prices will jump from 53% to roughly 62-65% for premium sticks.
3. Impact on Smokers: What to Expect
Manufacturers are expected to pass these costs directly to consumers starting in February.
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Premium Cigarettes (75mm+): This segment (which makes up 16% of ITC’s volume) faces the steepest hike.
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Price Increase: Analysts predict a hike of ₹2 to ₹3 per stick for premium brands like Gold Flake Kings and Marlboro.
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Overall Cost Rise: Overall production costs for the 75-85mm segment are projected to rise by 22-28%.
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The post Tobacco Stocks Crash: New “Sin Tax” Hits Cigarettes (2026) first appeared on Business League.
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