Cigarrete prices to increase after GST

The stock market saw a fall of 15 percent in the shares of ITC Ltd, its steepest fall in 25 years. Many brokerages downgraded the stock and reduced their target prices as the government increased their cess on cigarettes, which ultimately led to the company going through an erase of nearly Rs50,000 crore in market value.

Not just that, other cigarette companies like VST Industries Ltd went down 3 percent and Godfrey Phillips India Ltd shares have also gone down by 6 percent mentioned Inshorts.

CLSA in a note mentioned “We were forced to downgrade to ‘sell’ as earnings outlook weakens,” adding, “Price hike would be required to grow earnings which may also impact volumes. The outcome is clearly negative from the neutral stance that the government always mentioned.”

Livemint also reported, that the prices of cigarettes will also increase by Rs 4.8-7.9 per 10 sticks, which further depends upon the specific filters and length of the cigarettes. Finance Minister Arun Jaitley, quoted after GST Council meeting, the increase in cigarette cess will ultimately benefit the exchequer by an approximate amount of Rs5,000 crore per year.

Sources: Inshorts, Livemint