Tobacco Stocks Today: ITC stays flat, VST & Elitecon Int. shares slip — But this scrip surges 4%

Tobacco stocks saw mixed movement after the Lok Sabha passed the Central Excise (Amendment) Bill, 2025, which grants the government the power to raise excise duty on tobacco and paan masala products once the GST compensation cess comes to an end.

While most cigarette-focused companies experienced a decline, bidi makers and diversified players showed a different trend.

Tobacco Stocks Today

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At around 10 am, Shares of ITC traded steady at Rs 401.55, up by 0.2 per cent, supported by its strong FMCG, hotels, and paper businesses. Investors often view ITC as more than just a cigarette company, and this diversified revenue base helped cushion the stock despite tax-related worries.

Brokerage commentary also influenced sentiment. Macquarie, in a note on ITC, said concerns around the draft excise document may be “misplaced” because the proposed per-stick rates represent caps rather than immediately applicable rates.

The brokerage maintained an outperform rating with a target price of Rs 500, indicating confidence in the company’s medium-term earnings.

Even so, Macquarie admitted that a clear picture of cigarette taxation will be required before a meaningful valuation re-rating occurs.

On the other hand, several smaller tobacco companies saw declines. Elitecon International fell by over 3 per cent, VST Industries slipped nearly 1 per cent, and NTC Industries dropped around 0.8 per cent.

However, bidi-focused counters bucked the trend. Sinnar Bidi Udyog rose over 4 per cent, reflecting the different tax environment for bidis. Recent GST decisions have reduced the tax burden on the bidi value chain.

GST on bidis was cut to 18 per cent, down from 28 per cent earlier, and the GST on tendu leaves, essential for rolling bidis, was lowered from 18 per cent to 5 per cent.

This move contrasts sharply with cigarettes and gutkha, which now fall under a higher 40 per cent GST slab, and may face further excise adjustments under the new Bill.

With lighter taxes and lower regulatory pressure, the bidi segment faced less selling pressure, allowing some stocks to gain even as the broader tobacco basket weakened.

What the New Bill Enables

The Bill empowers the Centre to re-align the excise duty structure for all tobacco categories. This change becomes relevant because the GST compensation cess, currently charged on cigarettes, cigars, hookah, zarda, scented tobacco and other products, will be discontinued after the government finishes repaying loans taken during the COVID period to compensate states for revenue loss.

Finance Minister Nirmala Sitharaman told the Lok Sabha that repayment of these back-to-back loans is expected to be completed “in another couple of weeks.”

Once this happens, the Centre will regain fiscal space to bring back excise duty and adjust tax rates. The Bill proposes a wide range of excise duties: Cigarettes will be taxed between Rs 2,700 and Rs 11,000 per 1,000 sticks, depending on their length and whether they are filtered.

Cigar and cheroot excise is set at 25 per cent or Rs 5,000 per 1,000 sticks, whichever is higher. Unmanufactured tobacco will face a 60–70 per cent excise duty, while chewing tobacco may be taxed at Rs 100 per kg.

Because excise revenue flows into the divisible pool, states will receive their share based on the Finance Commission formula.

After loan repayment, the government also plans to raise GST on tobacco products from 28 per cent to about 40 per cent, further tightening the tax net.