Godfrey Phillips shares plunge over 15%, ITC tanks over 9% as additional excise duty on tobacco products will be implemented from Feb 1

Shares of Godfrey Phillips declined as much as 15.45% to the low of ₹2,335.30 apiece on the NSE while ITC tumbled as much as 9.4% to the low of ₹365.10 on the NSE.

VST Industries was trading over 3% lower at ₹249.40 on the NSE.

Shares of the company were under pressure as investors fear that the additional levy will lead to a significant increase in tobacco product prices, thereby adversely affecting related companies.

The new levies on tobacco and pan masala will be in addition to the GST rate and will replace the compensation cess currently levied on these sin goods.

From February 1, pan masala, cigarettes, tobacco, and similar products will attract a GST rate of 40%, while biris will attract 18% Goods and Services Tax (GST), according to a government notification.

Additionally, a health and national security cess will be levied on pan masala, while tobacco and related products will incur an additional excise duty.

The Finance Ministry on Wednesday also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026.

Parliament had in December approved two Bills allowing the levy of the new Health and National Security Cess on pan masala manufacturing and excise duty on tobacco.

The government on Wednesday notified February 1 as the implementation date for these levies. The current GST compensation cess, which is currently levied at varied rates, will cease to exist effective February 1.

What happened in December 2025?

In December 2025, Finance Minister Nirmala Sitharaman introduced two Bills in the Lok Sabha to levy excise duty on tobacco and tobacco products and a new cess on the manufacturing of pan masala, which would replace the GST compensation cess on such sin goods.

The Central Excise (Amendment) Bill, 2025, will replace the GST compensation cess, which is currently levied on all tobacco products like cigarettes, chewing tobacco, cigars, hookahs, zarda, and scented tobacco.

The bill seeks "to give the government the fiscal space to increase the rate of central excise duty on tobacco and tobacco products so as to protect tax incidence" once the GST compensation cess ends, according to the statement of objects and reasons of the bill.

The Health Security se National Security Cess Bill, 2025, seeks to levy a cess on the production of specified goods like pan masala.

Sin goods like tobacco and pan masala currently attract a GST of 28%, plus a compensation cess, which is levied at varied rates.

The Central Excise Amendment Bill seeks to levy excise duty on cigars/cheroots/cigarettes in the range of ₹5,000-₹11,000 per 1,000 sticks.

Besides, it proposes a levy of 60-70% on unmanufactured tobacco and 100% on nicotine and inhalation products.

Currently, cigarettes attract a compensation cess of 5% ad valorem plus a ₹2,076-₹3,668 per 1,000 sticks cess, depending on the length.

Once the compensation cess ends, the sale of tobacco and related products will attract a 40% GST plus excise duty, while pan masala will attract a 40% GST plus the Health Security se National Security Cess.