ITC shares in focus as new Cigarette tax take effect; Stock had worst January on record

Shares of ITC Ltd. will be in focus today as the new taxation on cigarettes takes effect from today, February 1, 2026. The stock will also be in the spotlight for any further clarity on this that can be announced by Finance Minister Nirmala Sitharaman during Budget 2026.

On January 1, the Finance Minister had notified that a GST rate of 40% on tobacco, Cigarettes will be effective from February 1, 2026. Clarity is still needed on the actual additional duty or cess imposition and the total tax impact post this implementation.

Earlier, the taxation came from 28% GST, plus a specific cess from ₹2,076 to ₹4,170 per 1,000 sticks, an ad valorem cess between 5% to 36%, and a NCCD between ₹510 to ₹850 per 1,000 stocks.

The expected taxation is now to be 40% GST, along with the new excise duty between ₹2,100 to ₹8,500 per 1,000 sticks and the NCCD of ₹510 to ₹850 per 1,000 sticks.

The move resulted in a slew of downgrades on ITC and hence, the number of "sell" recommendations on the stock are at the highest level in at least 15 years.

For the December quarter, ITC reported Cigarette volume growth of 6.5% year-on-year. The figure was higher than the upper range of the 5% to 6% growth estimate, as per the CNBC-TV18 poll.

ITC shares fell as much as 20% in the month of January, the worst start to a calendar year that the stock has had on record. The fall has also resulted in the stock shedding over ₹1 lakh crore in market capitalization in the month gone by.

Shares of ITC ended 1.2% higher last Friday at ₹322.3.

(With Inputs From Mangalam Maloo)