ITC raises cigarette price as GST council revises cess

ITC has raised prices of select cigarette brands to pass on the 6-7 per cent hike in the additional cess on cigarettes. Sameer Deshmukh, a research analyst with Reliance Securities, said the price hikes were 6-15 per cent across brands with the average hike coinciding with the 6-7 per cent rise in effective taxes under the goods and services tax.

An ITC statement said prices of its Classic and Gold Flake brands had been increased to ~150 for a pack of 10. The price of Wills has been raised to ~94 for a pack of 10. Wills Flake is now priced at ~66.

The GST Council at its meeting on July 17 increased the compensation cess by ~485-792 per thousand cigarettes. A 31 per cent increase in the ad valorem component of the cess was levied under the ‘others’ category.

“Prices of select brands have been revised. There is adequate availability of stocks in the market,” an ITC spokesperson said.

The company clarified the price hike would be immediate. “In respect of cigarettes manufactured or packed prior to July 18 and are yet to be sold to consumers, the maximum retail price stands revised,” the notice stated.

The GST Council, after reducing the additional cess on cigarettes by 6 per cent earlier this month revised rates on July 18.

“The price increase will hit sales and thus the company’s top line. However, since ITC is passing on the additional tax burden to consumers, its operational margins will remain stable,” Deshmukh said.

Industry executives said the effective tax hike for 2017-18 was 16-17 per cent if the previous increase of 6 per cent announced in the Budget was taken into consideration.

The ITC scrip reacted positively to the price revision and climbed 1.63 per cent to ~293.20 on the BSE.

Stocks of other cigarette companies like Godfrey Phillips, VST Industries also reacted positively.