Shares Of ITC, Varun Beverages Slip On Tuesday After Reports State GST Hike Likely On Tobacco, Aerated Drinks

The cigarette maker, ITC, saw its shares decline 3 per cent in the intra-day trade today, while aerated drinks maker, Varun Beverages, clocked a 5 per cent fall in the market

The Group of Ministers (GoM) on GST rate rationalisation suggested that a new slab of 35 per cent would be applicable on tobacco, tobacco products, and aerated drinks.

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Shares of ITC and Varun Beverages slumped on Tuesday morning after reports emerged claiming that the authorities might hike the Goods and Services Tax (GST) on cigarettes, tobacco, and aerated drinks. 

The cigarette maker, ITC, saw its shares decline 3 per cent in the intra-day trade today, reported Business Standard. Aerated drinks maker Varun Beverages witnessed a 5 per cent plunge in the stock market in the morning trading hours to touch Rs 600 amid heavy volumes.

Meanwhile, around 1 PM, the shares of ITC touched Rs 470.45 apiece on the BSE, slipping more than 1 per cent. At the same time, Varun Beverages traded at Rs 619 per share in the stock market, registering a fall of over 2 per cent.

This negative sentiment for the shares was driven by the latest reports about GST rates on cigarettes and aerated beverages. Notably, on Monday, the Group of Ministers (GoM)  on GST rate rationalisation, led by Deputy CM of Bihar Samrat Chaudhary suggested that a new slab of 35 per cent would be applicable on tobacco, tobacco products, and aerated drinks. Currently, these goods are taxed at the 28 per cent slab.

In the last three years, ITC shares have rallied ahead and climbed more than 100 percent, while the stock price of Varun Beverages has surged a whopping 424 per cent. Comparatively, the benchmark BSE Sensex index gained 39 per cent during the period.

In its annual report for the 2023-24 fiscal year (FY24), ITC noted that taxes on cigarettes in India are multiple times higher than in developed countries like the US, Japan, Germany, and so on.

Historically, sharp rises in taxes have negatively affected tax collections and legal cigarette volumes, the company said. It added that a consistent and stable tax system enhances buoyancy in tax collections. It is expected that illicit trade would lead to an annual revenue loss of nearly Rs 21,000 crore to the authorities.