ITC, Other Cigarette Stocks Rally up to 4% as Govt Hikes Excise Duty Marginally

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ITC, Other Cigarette Stocks Rally up to 4% as Govt Hikes Excise Duty Marginally

 

NEW DELHI: Shares of cigarette makers surged up to 4 per cent on Wednesday even as the Finance Minister Arun Jaitley announced hiked excise duty on various length of cigarettes by 2.5 per cent to 6 per cent.

While excise on various lengths of cigarettes has been increased by 2.5% to 6%, for paan masala, it has been increased from 6% to 9% and unmanufactured tobacco from 4.2% to 8.3%. For other tobacco products like chewing tobacco, jarda-scented tobacco and gutkha, Jaitley proposed to double the excise from 6% to 12%.

Shares of ITC Ltd, the country’s largest cigarette maker, were up 3.47% at Rs267 at 2.40pm after the announcement.

The proposed excise duty hike is below the estimates of equity analysts. Analysts had expected the duty increase to be around 10%.

Since July 2014, when Jaitley presented the National Democratic Alliance government’s first budget, taxes on cigarettes have increased substantially.

In the 2015 budget, Jaitley hiked excise duty by 25% on cigarettes of length not exceeding 65mm, and by 15% on cigarettes of other lengths. In last year’s Budget, Jaitley increased excise on cigarettes by around 10%.

Companies will decide on the actual price increase on cigarettes and other tobacco products after calculating the effect of the tax increase.

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