New Delhi: Shares of major Indian tobacco companies fell sharply on Wednesday after the government announced a new excise duty on cigarettes, raising concerns among investors about higher prices and slower sales growth.
Stocks of ITC Ltd dropped around four percent in early trade, while Godfrey Phillips India fell between seven and ten percent during the session. The fall in tobacco shares also weighed on the broader FMCG index, which slipped as investors reacted to the policy change.
The government said the new excise duty will come into effect from February 1, 2026. Under the revised structure, cigarettes will attract an additional tax ranging from about two thousand rupees to eight thousand five hundred rupees per one thousand sticks, depending on their length. This will be charged on top of the existing goods and services tax.
Market analysts said the new levy could increase the overall tax burden on some cigarette categories by more than twenty percent. Companies are expected to pass on at least part of the higher cost to consumers, which could lead to price increases at the retail level. Higher prices may affect demand, especially among price sensitive consumers.
The government has defended the move as part of its efforts to address public health concerns linked to smoking and to strengthen revenue collection. The excise duty hike follows the passage of a law in parliament last month that allows for higher and more permanent taxation on cigarettes and other harmful products.
Despite the sharp fall in tobacco stocks, the broader Indian equity market remained largely stable, with gains in other sectors helping to offset the losses. However, analysts warned that tobacco shares could remain under pressure in the coming weeks as investors assess the long term impact of higher taxes on earnings and volumes.
The new duty marks one of the strongest tax actions on cigarettes in recent years and signals the government’s intent to further discourage tobacco consumption while boosting public revenue.