Deja-vu for ITC and tobacco stocks with propsects of new taxes

Source :Sify
Author :Finance Desk
Last Updated: Tue, Oct 19th, 2021, 20:15:00hrs
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ITC stocks

Mumbai: The Indian Tobacco Company had a Deja-Vu moment of sorts with stocks recording a slump of nearly 6.5 percent in the session on Tuesday.

The stock slipped by Rs 16.35 to settle at Rs 246.10 apiece. The number is significant for a stock the size of ITC which has usually been the subject matter of memes.

On Tuesday, news of a harsher tax on smokeless and smoked tobacco products gained prominence leading to investor worry on the stock.

Concerns of tobacco taxation in the run up to the Budget 2022 caused much scare on the D-street. This is not the first time that a probable taxation has affected the stock price.

Six years ago, shares of ITC slipped by seven percent after a panel headed by then Chief Economic Advisor Arvind Subramanian recommended raising the tax rate on cigarettes to 40 percent.

In the pre-GST era, news reports indicated that ITC paid a 'blended tax' of 64-65 percent.

Surprisingly the taxation move will be spearheaded by the Union Ministry for Health and Family Welfare which will setup an expert panel to review the taxation policy on cigarettes. The panel is expected to have representations from the GST council as well as the Central Board of Indirect taxes and other finance ministry officials.

With the prospects of higher tax outgo looming large, analysts are of the opinion that business margins are likely to slip. However, many have called this as a time to reconsider an entry in tobacco stocks. 

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