The government has decided to increase GST on cigarettes and tobacco products. The Group of Ministers (GOM) has proposed increasing the existing 28 percent GST on cigarettes and tobacco products to 35 percent. After this news, there was a decline in the shares of cigarette manufacturing companies on Tuesday. Till the time of writing the news, a decline of up to 3% has been recorded in the shares of ITC, VST Industries and Godfrey Phillips.
Will the shares fall further?
The government has decided to increase GST on cigarettes and tobacco. Now, in addition to 28% GST, additional tax of up to 35% can be imposed on cigarettes. This new proposal has had a negative impact on the shares of these companies. Currently, cigarettes attract 28% GST and an additional tax of 5% to 36% depending on the length. If this new tax is implemented, companies may have to increase their prices. This will affect the earnings of companies and share prices may fall further.
Fall in shares of these companies
Shares of ITC fell 3% to Rs 462.80, VST Industries fell 2.3% to Rs 318.30 and Godfrey Phillips fell 3.2% to Rs 5,575.50. Macquarie, which is a big broker, has given its opinion about ITC. He says that ITC will have to increase its prices to avoid this tax increase. Macquarie has set a target of Rs 560 for ITC shares. He believes that even after this change, ITC can benefit if the company adopts its strategy correctly. Macquarie believes that ITC will have to increase its prices to cope with this change.
Structure of GST
Cigarettes now attract 28% GST and additional tax ranging from 5% to 36%. Now the government is considering increasing it to 35%. Apart from this, luxury goods like cars and washing machines also attract higher taxes. Due to this, the prices of these goods may also increase and the common man will be affected.