Tobacco Stocks in Focus: ITC, Godfrey Phillips trade mixed as government readies new cess, excise overhaul

Tobacco stocks were in focus on Monday, with investors turning cautious ahead of two key tax-related bills scheduled to be tabled in the Lok Sabha. Shares of ITC Ltd and Godfrey Phillips India edged lower in early trade. The mixed movement came after Finance Minister Nirmala Sitharaman introduced two key legislations in the Lok Sabha — the Central Excise (Amendment) Bill, 2025 and the ‘Health Security se National Security’ Cess Bill, 2025 — signalling the next leg of tax reforms for the tobacco sector.

ITC shares were quoting at Rs 404.80, up 0.14 per cent, recovering from early declines, while Godfrey Phillips India traded at Rs 2,862, down 0.38 per cent on the NSE as of early afternoon. VST Industries was marginally higher at Rs 255, inching up 0.12 per cent.

Government lines up key tax bills

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The market reaction comes as the government prepares to introduce the Central Excise Amendment Bill, 2025, and the ‘Health Security se National Security’ Cess Bill, 2025 in Parliament.

According to earlier reports, the excise overhaul aims to eventually replace the current GST compensation cess levied on cigarettes, chewing tobacco, cigars, zarda, hookah and other tobacco-linked products. This amendment is expected to give the Centre greater fiscal flexibility to revise excise duties once the compensation mechanism concludes.

The second bill proposes a dedicated cess on the production of specified goods, including pan masala, creating the possibility of further tax burden on the sector.

What are these new bills?

The Central Excise Amendment Bill, 2025 seeks to replace the existing GST compensation cess currently imposed on cigarettes, chewing tobacco, cigars, zarda, hookah and related products. The proposed changes would give the Centre greater flexibility in revising excise duties once the compensation cess mechanism expires.

Market participants say the move could reshape the fiscal landscape for cigarette companies, which remain highly sensitive to tax-related developments.

The second proposal — the ‘Health Security se National Security’ Cess Bill, 2025 — introduces a dedicated cess on pan masala manufacturing, based on machine capacity. This new levy will operate independently of cigarette taxation and aims to establish a distinct tax route for the pan masala industry.

Stocks sensitive to tax expectations

Shares of ITC, Godfrey Phillips and VST Industries have historically responded to speculation around taxation policy, given the sector’s heavy reliance on regulatory stability. Traders said the market is now waiting for clarity on the scope of the proposed cess and excise revisions and how soon the changes, if approved, would come into force.