ITC Cigarette Price Hike: Impact on Stock, GST and Retail Prices

ITC cigarette price hike became a major market event after a sharp increase in tobacco taxes in early 2026. The change led to a steep fall in ITC’s market value in January, followed by a short recovery after retail cigarette prices were raised. Recent trading sessions show continued volatility in the stock.

This article explains the revised tax structure, the impact on cigarette cost after 40% GST, the stock market reaction, and the latest price movement.

What Triggered the ITC Cigarette Price Hike?

On 31 December 2025, the Finance Ministry revised the tax structure for tobacco products. The changes became effective from 1 February 2026.

Key Tax Changes

• GST on cigarettes increased from 28% to 40%
• Excise duty restructured based on cigarette length
• Longer and premium cigarettes now attract higher rates

Revised Excise Structure (Per 1,000 Sticks)

• Unfiltered below 65 mm: ₹2,050
• Filtered below 65 mm: ₹2,100
• Filtered 65–70 mm: ₹3,600–₹4,000
• Filtered 70–75 mm: ₹5,400
• Above 75 mm: Up to ₹8,500

The higher GST and revised excise duty significantly increased the cigarette cost after 40% GST across categories.

How ITC Shares Reacted to the Tax Hike

ITC Limited saw a sharp stock correction in January 2026.

January 2026: Steep Decline

• Stock fell nearly 20%
• Over ₹1 lakh crore in market capitalisation was erased
• Market cap slipped below ₹4 lakh crore
• 52-week low touched: ₹302
• 52-week high earlier: ~₹444

This marked one of the sharpest monthly declines for the company in many years.

Sector-Wide Impact

Other tobacco companies were also affected:

• Godfrey Phillips India: ~28% decline
• VST Industries: ~12% decline

Life Insurance Corporation of India, which holds 15.86% in ITC, saw the value of its stake decline significantly during the selloff.

Cigarette Cost After 40% GST: Retail Price Changes

After the tax revision, cigarette manufacturers increased retail prices to reflect higher tax outgo. Reports in early February showed price increases of 15–20% across categories.

Examples of Brand-Level Price Changes

• wills navy cut cigarette price
  76 mm pack: ~₹95 → ~₹120
• gold flake cigarette price
  84 mm pack: ~₹170–180 → ~₹220–225

Overall, pack prices increased between ₹22 and ₹55 depending on brand and cigarette length.

Early February Recovery in ITC Shares

On 6–7 February 2026, ITC shares rose more than 5% in a single session.

The rally followed confirmation that companies had passed on the higher tax burden to consumers through price hikes. The clarity on pricing reduced uncertainty around margins.

Other tobacco stocks also recorded gains during this period.

Latest ITC Stock Movement: Mid-February Update

Despite the early February rally, recent sessions show that ITC shares remain under pressure.

Current Trading Range (Mid-February 2026)

• ITC trading around ₹315–₹318 range
• Slight declines seen in recent sessions
• Stock remains well below its 52-week high of ~₹444

The share price is above the January low of ₹302 but has not returned to earlier peak levels.

What Recent Trading Reflects

The latest movement suggests:

• Continued investor caution
• Close monitoring of volume trends after price hikes
• Sensitivity to broader market conditions

The initial recovery did not develop into sustained upward momentum.

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The recent tax-induced volatility has significantly impacted ITC’s Implied Volatility (IV).

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Tobacco Taxation in India: Broader Context

India has one of the highest tax burdens on cigarettes globally.

Cigarettes are subject to:

• GST at 40%
• Compensation cess
• Central excise duty based on length

The revised structure increased the total indirect tax component significantly. Cigarettes contribute over 45% of ITC’s revenue. The segment supports its other businesses such as FMCG, hotels, agri, and paperboard.

Regulatory oversight also involves institutions such as the Tobacco Board, which plays a role in tobacco cultivation and trade.

ITC Stock Performance Snapshot