Shares of major tobacco makers, including ITC, have seen renewed market interest as reports emerge that cigarette prices could be increased sharply — by as much as 20 % to 40 % — across key brands in response to a significant rise in indirect taxes.
Tax-Driven Price Revision to Offset Higher Costs
New taxation rules in India — including an increase in GST on cigarettes to 40 % and a restructured excise duty regime — have significantly raised the overall tax burden on tobacco products. These changes took effect from 1 February 2026, compelling manufacturers to revise product pricing to protect margins.
Analysts and market reports suggest ITC is preparing to raise cigarette prices between 20 % and 40 % across its portfolio, with premium brands such as Gold Flake and Classic facing some of the largest increases.
Brand-Level Price Changes Under Consideration
According to market intelligence:
- Premium products like Gold Flake and Classic could see prices rise by more than 40 % in some segments.
- Slim or mid-tier categories could have price hikes of around 20 %.
- Even value segments are expected to be adjusted upward due to higher indirect costs.
Impact on Volumes and Margins
Brokerage firms have indicated the hikes are part of manufacturers’ efforts to offset steep tax increases, though there is a risk of volume decline as prices go up. Some analysts expect that staged or phased price hikes may be used to ease consumer response and protect revenue.
Market Reaction
News of the potential price increases has had a notable effect on stock markets: tobacco sector stocks, including ITC’s, rallied on investor expectations that pricing adjustments will help companies absorb tax headwinds without severely hurting profitability.
What This Means for Consumers
Smokers in India should anticipate higher retail prices for their favourite brands in the coming weeks as new inventories roll out with revised price tags, reflecting the substantial indirect tax changes and corporate pricing strategies.
