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Shares of Indian tobacco companies slumped on Thursday after the government imposed a new tax on cigarettes, making them costlier for an estimated 100 million smokers in the world\u2019s most populous country.<\/strong><\/p>\n ITC (ITC.NS) maker of Gold Flake and the market leader, fell 9.2%, while Godfrey Phillips India (GDFR.NS), opens new tab, the distributor of Marlboro in the country, tanked 14.1%.<\/p>\n Shares of ITC were trading at 365.50 rupees, their lowest level since April 2023, and were also on track for their worst day in nearly six years. Godfrey Phillips was set for its steepest fall since November 2016.<\/p>\n ITC was the biggest loser on the Nifty 50 index opens new tab and also led declines on the FMCG index (.NIFTYFMCG), opens new tab, which was trading 3.2% lower.<\/p>\n India\u2019s finance ministry late on Wednesday notified an excise duty of 2,050\u20138,500 rupees ($22.82\u2013$94.60) per 1,000 sticks, depending on cigarette length, effective February 1.<\/p>\n Jefferies analysts called the move \u201ca clear negative,\u201d saying it would hurt sales volumes and revive concerns about losing share to the illicit industry.<\/p>\n Health issues tied to smoking are seen as a major drain on India\u2019s resources, and the government has introduced steps, including larger warning labels and periodic tax adjustments, to curb consumption.<\/p>\n While the government has not specified the impact of the duty change on retail prices, analysts say higher taxes could prompt companies to raise prices.<\/p>\n The duty translates into a 22%-28% increase in overall costs for 75-85 mm cigarettes, analysts at ICICI Securities said.<\/p>\n \u201cCigarettes longer than 75 mm account for roughly 16% of ITC\u2019s volumes and are likely to see price increases of 2\u20133 rupees per stick as a result of the levy,\u201d they said.<\/p>\n The new tax will apply in addition to the existing 40% Goods and Services Tax, the order showed.<\/p>\n<\/div>\n