ITC, Godfrey Philips shares tumble up to 3% amid reports GST council may hike tax rate on cigarettes, tobacco

According to news reports, the GoM on GST rate rationalisation on Monday decided to hike tax on sin goods like aerated beverages, cigarettes, tobacco, and related products to 35% from the present 28%.

ITC stock was trading at ₹462.75, down 3.02% on the NSE.

Shares of Godfrey Philips were trading at ₹5,578.75, down 3.10% on the bourse.

VST Industries slumped to a low of ₹318, down 2.32% on the National Stock Exchange.

The Group of Ministers (GoM) on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary also decided to rationalise tax rates on apparel.

As per the decision, readymade garments costing up to ₹1,500 would attract 5% GST, those between ₹1,500 and ₹10,000 would attract 18%. Garments costing above ₹10,000 would attract 28% tax.

In total, the GoM on rate rationalisation will propose tax rate tweaks on 148 items to the GST Council. "The net revenue impact will be positive," an official said.

The GoM report is expected to be discussed by the GST Council -- chaired by Union Finance Minister and comprising her state counterparts -- on December 21. A final decision on GST rate changes will be taken by the council.

"The GoM has agreed to propose a special rate of 35% on tobacco and related products and aerated beverages. The four-tier tax slab of 5, 12, 18, and 28% will continue and a new rate of 35% is proposed by the GoM," said the official.

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28%.

Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury goods like car, washing machine, and demerit goods like aerated water and tobacco products attract cess on top of the highest 28% slab.

The official said the GoM on rate rationalisation has finalised its report on Monday to be presented before the council.

The council will now decide whether there is further scope for rate rationalisation and may decide to retain the GoM so that the rationalisation exercise continues periodically, the official added.

In its last meeting in October, the GoM had proposed reducing GST on packaged drinking water of 20 litres and above to 5% from 18%.

It had also decided to propose to the council to reduce GST on bicycles costing less than ₹10,000 to 5%, from 12%.

Also, GST on exercise notebooks would be reduced to 5 per cent from 12%. The GoM also proposed hiking GST on shoes above ₹15,000/pair from 18% to 28%.

It also proposed hiking GST on wrist watches above ₹25,000 from 18% to 28% in the previous meeting on October 19.