Tobacco companies had a rough start to the new year 2026 as ITC shares dropped more than 6% to Rs 378.45 apiece, while Godfrey Phillips India tumbled as much as 10% to Rs 2,484.80 apiece. The sharp fall on tobacco companies stock comes after the government on Wednesday announced a hike in cigarette prices effective from February 1.
In December, Parliament approved the Central Excise (Amendment) Bill, 2025, which allows a significant increase in taxes on cigarettes and other tobacco products. The new law replaces a temporary levy that was in place earlier.
The finance ministry said the excise duty will be charged in addition to the existing 40% GST. The new tax will range from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on the length of the cigarette.
Also Read – Cigarette Prices Set To Rise In 2026: ITC Share Price Dips As India Imposes New Tax
Currently, total taxes on cigarettes in India make up about 53% of retail prices, which is below the World Health Organisation’s recommended 75% meant to discourage smoking. This includes a 28% GST and additional taxes based on cigarette size.
According to ICICI Securities, the new duty will raise the cost of 75–85 mm cigarettes by 22–28%. They added, “Cigarettes longer than 75 mm account for roughly 16% of ITC’s volumes and are likely to see price increases of 2–3 rupees per stick as a result of the levy.”
