Summary of this article
The new tax is expected to affect more than 100 million smokers in India
ITC fell up to 14 per cent, while Godfrey Phillips declined as much as 21 per cent
Cigarette costs are likely to increase by Rs 2.05-Rs 5.40 per stick
ITC, Godfrey Phillips Share Price: Shares of tobacco companies continued to fall on January 2, 2026, after the government announced a new tax on cigarettes, which will come into effect from February 1, 2026. The new tax is expected to affect more than 100 million smokers in India who consume cigarettes, beedis and hookahs, according to a survey by the Global State of Tobacco Harm Reduction (GSTHR).
ITC, the country’s largest cigarette maker and the manufacturer of Gold Flake, fell as much as 14.33 per cent over the past two trading sessions. Godfrey Phillips India, which distributes Marlboro in India, plunged nearly 21 per cent during the same period. ITC shares touched a low of Rs 345.25 apiece, their lowest level since February 2023, while Godfrey Phillips slipped to Rs 2,185, hitting an eight-month low level.
With a weightage of about 32.70 per cent in the Nifty FMCG index, ITC’s sudden plunge dragged the index lower by nearly 5 per cent over the previous two sessions, pushing it to its lowest level since April 2025.
What Changed Under The New Cigarette Excise Duty
Late on December 31, 2025, the Union Ministry of Finance notified a revised excise duty on cigarettes ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, depending on their length. The new rates will come into effect from February 1, 2026.
This excise duty will be levied over and above the existing 40 per cent goods and services tax (GST).
Longer The Cigarette, Higher The Tax Burden
According to the government’s notification, short, non-filter cigarettes of up to 65 mm will attract an additional excise duty of about Rs 2.05 per stick. Short filter cigarettes of the same length will see a slightly higher duty of around Rs 2.10 per cigarette.
Medium-length cigarettes between 65 mm and 70 mm will face additional Rs 3.60-4 per stick. Longer, premium cigarettes in the 70–75 mm category will be hit the hardest among standard products, as the excise duty will add about Rs 5.40 per cigarette.
There is also an “other” category that carries a much higher duty of Rs 8,500 per 1,000 sticks, but this applies only to unusual or non-standard designs. Most popular cigarette brands are not covered under this slab.
