Shares of three cigarette makers fell 0.19% to 3.61% after the government hiked the excise duty on cigarettes and tobacco products in the Union Budget 2020-21.
ITC (down 3.61%), Godfrey Phillips India (down 1.70%) and VST Industries (down 0.19%) declined.
Presenting the Union Budget 2020, Finance Minister Nirmala Sitharaman said, As a revenue measure, I propose to raise excise duty, by way of National Calamity Contingent Duty on cigarettes and other tobacco products. However, no change is being made in the duty rates of bidis.
National Calamity Contingent Duty (NCCD) is levied as a duty of excise on certain manufactured goods specified under the Seventh Schedule of Finance Act, 2001. The Union Budget proposed an increase in the NCCD on tobacco products (except bidi).
On cigarettes, NCCD increase ranges from Rs 200 - 735 per thousand, depending upon length of cigarette and on filter/non-filter basis. On smoking mixtures for pipes and cigarettes, NCCD has been increased from 45% to 60%.
On other forms of smoking tobacco (other than smoking mixtures for pipes and cigarettes) and forms of chewing tobacco, NCCD has been raised from 10% to 25%.
Tobacco Institute of India said the increase in NCCD announced in the Union Budget 2020-21 and the resulting escalation in cigarette taxation will serve as a huge incentive to illegal cigarette traders, who target India as a preferred destination for smuggled cigarettes.
Illegal cigarette trades have grown consistently in the country and now account for 1/4th of the Indian cigarette market, the media reported.
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