Highlights:
- GoM Proposal: GST on sin goods, including tobacco and aerated beverages, may rise from 28% to 35%.
- Impact on Shares: Stocks of ITC and Godfrey Phillips likely to react to the news.
- GST Council Meeting: Final decision expected on December 21, 2024.
On December 3, 2024, shares of ITC and Godfrey Phillips, key players in the tobacco industry, witnessed significant movements following reports of a potential GST hike. The Group of Ministers (GoM) on GST rate rationalization has recommended increasing the tax rate on sin goods, including tobacco products, from 28% to 35%.
Proposed Changes
The GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, finalized its report, suggesting a new 35% GST slab for sin goods. This would include:
- Cigarettes
- Tobacco products
- Aerated beverages
These recommendations aim to offset revenue losses from rate cuts on essential goods.
Stock Market Reaction
Following the news:
- ITC: Shares fell 2.16% to ₹466.85.
- Godfrey Phillips: Shares dropped 2.7% to ₹5,605.3.
- VST Industries: Declined 1.7% to ₹319.75 apiece.
Broader Impact
This potential tax increase could affect:
- Revenue: Higher costs might impact demand.
- Diversified Portfolios: ITC’s non-tobacco businesses may cushion the blow.
Key Details on GST Rationalization
- Current structure retains four slabs: 5%, 12%, 18%, 28%.
- New 35% slab proposed for demerit goods.
- Over 148 items under review, including apparel, luxury goods, and beverages.
Next Steps
The GST Council, led by Union Finance Minister Nirmala Sitharaman, will decide on these proposals in its meeting scheduled for December 21, 2024, in Jaisalmer.
