The Finance Ministry has notified the imposition of a 40% GST on tobacco, cigarettes, and bidis, effective February 1, 2026. This comprises a 28% tax along with the subsuming of excise and NCCD.
The key question for investors is whether any additional cess or duty will be levied and what the total tax burden will be after the change.Health concerns linked to smoking have long been seen as a major drain on India’s resources. The government has taken steps, including larger warning labels and periodic tax adjustments, to curb consumption.
The announcement comes after the government approved the Central Excise (Amendment) Bill 2025 in December, which replaces a temporary levy on cigarettes and tobacco products.
While the government has not specified the impact of the duty hike on retail prices, analysts say higher taxes could prompt companies to raise prices.
Alongside Godfrey Phillips, ITC shares also fell to nearly two-year lows on Thursday. ITC was the biggest loser on the Nifty 50 index and led declines on the FMCG index, which was trading 1.6% lower.
Shares of ITC fell 4.1% to ₹386.3, marking the stock’s first year of negative returns since 2020 after a 12% decline in 2025. These levels were last seen in March 2024, and Thursday’s fall was the company’s biggest single-day drop in over eight months.
