ITC shares dropped 3% to a day’s low of Rs 462.80, while VST Industries shares declined 2.3% to Rs 318.30, and Godfrey Phillips fell 3.2% to Rs 5,575.50 on the BSE.
Global brokerage Macquarie has maintained its “outperform” rating on ITC with a target price of Rs 560, stating that ITC will need at least a high single-digit price hike to offset the proposed tax increase.
Under the current rules, cigarettes attract a 28% GST along with a compensation cess ranging from 5% to 36%, depending on the length of the cigarette, with the longest cigarettes attracting the maximum cess of 36%.
The GoM report is expected to be discussed by the GST Council, which is chaired by the Union Finance Minister and includes her state counterparts, on December 21. A final decision on the proposed GST rate changes will be made by the council.
“The GoM has agreed to propose a special rate of 35% on tobacco and related products, as well as aerated beverages. The four-tier tax slabs of 5%, 12%, 18%, and 28% will remain, with the introduction of a new rate of 35% proposed by the GoM,” PTI quoted an official as saying.Under GST, essential items are either exempt or taxed at the lowest slab, while luxury and demerit goods are taxed at the highest slab. Luxury goods like cars and washing machines, along with demerit goods like aerated beverages and tobacco products, attract an additional cess on top of the 28% slab.
The official further stated that the GoM on rate rationalisation finalized its report on Monday, which will be presented to the GST Council.