Higher tobacco taxes burn cigarette makers' net revenue, volumes, profit in Q1
Major Indian cigarette manufacturers, including ITC, reported declines in net revenue and profit for the first quarter following a significant increase in government taxes. While gross revenue appeared to rise due to the tax pass-through, underlying sales volumes were negatively impacted by the new duty regime.
Why it matters
It illustrates the direct impact of fiscal policy changes on the profitability and market performance of the tobacco industry in India.
The government's steep increase in taxes on cigarettes and tobacco products has started weighing on the country's leading cigarette makers, with ITC, Godfrey Phillips India, and VST Industries reporting declines in net revenue, volumes and profitability in the April-June quarter, the first full quarter after the revised tax regime came into effect.
The three companies together account for more than 90% of the domestic cigarette market, which, according to some reports, has an estimated annual volume of over 100-120 billion sticks.
Earlier in February this year, the government raised the goods and services tax (GST) on cigarettes and tobacco products to a flat 40%. It replaced the compensation cess with a new additional excise duty ranging from ₹2,100-8,500 per 1,000 sticks, depending on cigarette length.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in