ITC sees cigarette volumes drop due to VAT

Following incidence of higher tax rates due to imposition of 12.5% value added tax (VAT) on cigarettes, ITC feels that sales volume will definitely nose-dive, the extent of which would be ascertained at a later date.

"A 33% rise in taxes is bound to affect volumes. We will have to wait and watch for the actual impact," an ITC source told PTI.

He, however, said that the extent of price rise may not be enough to compensate for the loss in volumes.

ITC is a leading player in the cigarette industry, where consumption of cigarettes constituted only 15% of the tobacco market.

The source said that the growth of the cigarette business, which had been the traditional line of activity for ITC, was more or less stable.

As compared to the cigarette business, the growth of the company's hotels, fast moving consumer goods (FMCG) and paperboards divisions had been extremely fast.

The company had also drawn up plans to invest Rs 300 crore in the cigarette business at Kidderpore in the metropolis for which clearance for land, which belongs to Kolkata Port Trust, was still awaited.