The stock market’s New Year party just got cut short by a heavy cloud of tobacco smoke. As of Friday, January 2, 2026, ITC Ltd. is reeling from its biggest crash since the 2020 pandemic, with shares plunging 10% in a single day.
The thing is, the government isn’t just nibbling at tobacco profits; they’re taking a massive bite. Late on Wednesday night, a notification dropped that essentially re-engineered the entire tax structure for “sin goods.” Or nothing. Let’s be real, the market was expecting a hike, but nobody saw a 30% effective jump coming. Those too.
Also Read | Imran Khan and Bushra Bibi Sentenced to 17 Years in Jail
The “Tax Rejig” Log: Field Notes
It’s an ongoing situation where the old “GST Compensation Cess” is being killed off and replaced by a more aggressive Central Excise Duty.
-
The Date: Everything changes on February 1, 2026.
-
The New Math: * GST: Fixed at 40% for all tobacco products (except bidis at 18%).
-
Excise Duty: Ranges from ₹2,050 to ₹8,500 per 1,000 sticks, depending on length.
-
The “Hidden” Surcharge: The National Calamity Contingent Duty (NCCD) is staying put, creating a “tax on a tax.”
-
-
The “Kicker”: This brings India’s total tax incidence on cigarettes to roughly 73% of the retail price, finally inching toward the WHO’s “gold standard” of 75%.
Also Read | Imran Khan and Bushra Bibi Sentenced to 17 Years in Jail
Market Meltdown: Who Got Burned?
And here’s the kicker: the sell-off wasn’t just retail panic. Institutional heavyweights are running for the exits.
-
ITC Ltd: Down 10% (hit a 52-week low of ₹362). Wiped out over ₹50,000 crore in market cap in one session.
-
Godfrey Phillips (Marlboro): Even worse—plunged 17%.
-
The Price Hike: Analysts at Jefferies and Emkay say ITC will likely have to raise cigarette prices by at least 15% to 20% just to stay afloat. A single stick of a premium brand like Gold Flake could jump from ₹18 to ₹22 or ₹25.
Also Read | Imran Khan and Bushra Bibi Sentenced to 17 Years in Jail
The “Illicit” Threat
It’s an ongoing situation where the “gray market” is the real winner. When legal sticks get this expensive, smokers usually don’t quit—they just “down-trade” to smuggled, tax-free cigarettes. Jefferies warned that this “sharp increase at one go” might undo years of work the legal industry did to fight illicit trade.
Basically, the government is framing this as a “Health and National Security” move—the revenue from the new cesses will go toward multi-year security preparedness and equipment. But for the 37 lakh ITC shareholders, it just feels like a very expensive New Year’s resolution.
Also Read | Imran Khan and Bushra Bibi Sentenced to 17 Years in Jail
End…
