ITC shares in focus post GST 2.0: Three developments you need to know

On Monday, September 8, the stock was trading at ₹408.80, up 0.36% in the afternoon session on the NSE.

The GST Council on Wednesday, September 3, cleared major changes to the indirect tax regime, approving an overhaul of rates by limiting slabs to 5% and 18%, effective from September 22, the first day of Navaratri.

Almost all personal use items will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.

Briefing reporters after a marathon daylong GST Council meeting, Union Finance Minister Nirmala Sitharaman said all decisions were taken unanimously, with no disagreement with any state.

The panel approved simplifying the goods and services tax (GST) from the current four slabs -- 5, 12, 18 and 28% -- to a two-rate structure -- 5 and 18%.

However, a special 40% slab is also proposed for a select few items such as high-end cars, tobacco and cigarettes.

The new rates for all products, except gutkha, tobacco and tobacco products and cigarettes, will be effective September 22 -- the first day of Navratri, she said.

Shares of ITC have remained muted over the past six months. Data show that the stock price has gained just 0.72% in the past six months (as of the September 5 closing). It has slipped 1.59% in the past 30 days and 0.20% in the past five sessions.

The GST rate changes will have both positive and negative implications on ITC.

_Here are three things you need to know. _

GST on food and daily-use items reduced

Commonly used foods and beverages ranging from butter and ghee to dry nuts, condensed milk, cheese, figs, dates, avocados, citrus fruits, sausages and meat, sugar-boiled confectionery, jam and fruit jellies, tender coconut water, namkeen, drinking water packed in 20-litre bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, pastry and biscuits, corn flakes and cereals, and sugar confectionery are likely to see a cut in the tax rate to 5% from the current 12% or 18%.

Besides, consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see a rate cut from 12% to 5%. The same on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut down from 18% to 5%.

This is a positive development for major FMCG players, including ITC, as lower costs will drive demand for its products, aiding its profitability.

GST rate on stationery items cut

The GST Council has cut tax levies to zero on several educational items. At its marathon 56th meeting chaired by Union Finance Minister Nirmala Sitharaman, the Council decided to reduce GST on erasers from 5% to nil.

Items such as printed maps, atlases, wall maps, topographical plans and globes; pencil sharpeners; pencils, crayons, pastels, drawing charcoals and tailor’s chalk; as well as exercise books, graph books, laboratory notebooks and notebooks have also been moved from the 12% slab to nil-rated.

On the other hand, mathematical boxes, geometry boxes and colour boxes, earlier taxed at 12%, will now attract a reduced GST rate of 5%.

This is again positive for ITC, as the company's stationery business operates under the Classmate and Paperkraft brands, targeting students and professionals, respectively. Classmate is one of the leading names in student notebooks and offers a wide range of school supplies, including art products and pens.

GST rate on tobacco, cigarettes hiked

Finance Minister Nirmala Sitharaman announced that a special 40% slab is proposed for a select few items such as high-end cars, tobacco and cigarettes.

However, the FM stated that tobacco, gutkha, tobacco products and cigarettes will continue to be charged at the current 28% plus a compensation cess till such time that loans taken to pay states for revenue loss are fully paid back.

This is likely to have a negative impact on the stock.

According to reports, ITC’s cigarette business generated revenue of ₹32,631 crore in FY2024–25, contributing around 44% of the company’s total revenue. The company has a market share of around 75% of the cigarette market in India. ITC’s commonly sold cigarette and cigar brands include Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Capstan, Bristol, Flake, Silk Cut, Duke & Royal.

Hence, an increase in the GST on cigarettes and tobacco is likely to impact the company's cigarette segment.