New Delhi: Tobacco stocks faced a sharp decline on the first trading day of 2026, with shares of ITC and Godfrey Phillips falling up to 15%. The Finance Ministry has set 1 February 2026 as the date for imposing an additional excise duty on tobacco products.
Details of the New Excise Duty
The notification states that the new duty will apply based on cigarette length, ranging from ₹2,050 to ₹8,500 per 1,000 cigarettes, effective from 1 February. ITC shares dropped nearly 9% to ₹365, while Godfrey Phillips fell 15% to ₹2,335.
This new tax will be levied in addition to the existing GST, replacing the current compensation cess, which will cease from 1 February. According to the government, GST rates will be:
- 40% on pan masala, cigarettes, tobacco, and related products
- 18% on beedis
Additional health and national security cess will also apply to pan masala, along with the new excise duty on tobacco and related products.
Impact on Companies and Consumers
The increased taxation is expected to put pressure on cigarette manufacturers like ITC and Godfrey Phillips, potentially leading to higher retail prices. Currently, total taxes on cigarettes in India account for roughly 53% of retail price, well below the WHO target of 75% designed to discourage consumption. The total includes 28% GST and an additional length-based value levy.
The new levy follows the approval of the Central Excise (Amendment) Bill, 2025 in December, which replaces previous temporary taxes on cigarettes and tobacco products.
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