ITC stock gains despite GST committee rejecting tobacco tax cut proposal
Considering that there is no compensation cess on bidis, the tobacco industry sought rationalisation of compensation cess on products such as 70mm cigarettes.
Shares of ITC opened 0.40 percent higher on October 5, a day after the GST Council's Fitment Committee rejected a tobacco industry proposal to effectively cut tax rates. As of 9:40 am, the stock was trading 0.66 percent higher at Rs 438.85.
The tobacco industry had proposed a uniform additional compensation cess on cigarettes, bidis, smokeless tobacco products, and lower compensation cess on cigarette sticks up to 70 mm. Separately, auto component industry had also sought lowering of GST on electric vehicle (EV) batteries from 18 percent to 5 percent. according to a Moneycontrol report.
Sources told Moneycontrol that the GST Council Fitment Committee has rejected the EV batteries tax proposal too.
This move could impact stocks of cigarette-manufacturing companies like ITC. Cigarette continue to contribute to a majority of ITC's business, which is also involved in agri products, hotels, and non-cigarette FMCG products. In Q1FY24, ITC’s cigarette business saw a 13 percent growth in revenue at Rs 7,465.27 crore, year on year.
Currently, tobacco products such as cigarettes, chewing tobacco, gutkha, etc. attract GST, Compensation Cess, Basic Excise Duty, and National Calamity Contingent Duty (NCCD), while Bidis attract GST, Basic Excise Duty, and NCCD.
According to a CNBC TV18 report, sources said that considering that there is no compensation cess on bidis, the tobacco industry sought rationalisation of compensation cess on products such as 70mm cigarettes. However, the fitment committee felt that the change is not required as the bidi industry is a small scale industry and so it was kept free from cess.
