Tobacco Gst Rate
Table of Contents
In a shocking move, the GoM on GST rate rationalization has decided to hike the tax on sin goods like aerated beverages, cigarettes, tobacco, and related products to 35% from the current 28%. This decision is likely to impact the shares of cigarette stocks like ITC Godfrey Phillips and VST Industries. As a result, shares of these companies fell by up to 3% on Tuesday.
Understanding GST: A Brief Overview
For those who may not be familiar with GST (Goods and Services Tax), it’s a consumption tax that aims to simplify the country’s indirect tax regime. Under GST, goods and services are taxed at different rates, ranging from 5% to 28%. Essential items like food, clothing, and healthcare are exempt or taxed at the lowest slab, while luxury and demerit goods like cars, washing machines, aerated beverages, and tobacco products attract an additional cess on top of the 28% slab.
The Proposed GST Rate Hike (Tobacco Gst Rate)
The GoM on rate rationalization has decided to propose a special rate of 35% on tobacco and related products, as well as aerated beverages. This means that these goods will be taxed at the highest rate of 35%, in addition to the existing 28% GST slab.
Impact on ITC Shares (Tobacco Gst Rate)
Shares of ITC Godfrey Phillips fell by 3% to a day’s low of Rs 462.80, while VST Industries shares declined 2.3% to Rs 318.30. Godfrey Phillips shares dropped 3.2% to Rs 5,575.50 on the BSE. The decline in share prices is due to the fear that the proposed tax hike may lead to increased costs for these companies, ultimately affecting their bottom line.
Macquarie’s “Outperform” Rating (Tobacco Gst Rate)
Despite the uncertainty surrounding the proposed GST rate hike, Macquarie has maintained its “outperform” rating on ITC with a target price of Rs 560. The brokerage firm believes that ITC will need at least a high single-digit price hike to offset the proposed tax increase.
Why is the GST Rate Hike Necessary? (Tobacco Gst Rate)
The GoM report suggests that the GST rate hike is necessary to address the growing concern of tobacco-related health problems in India. According to the report, smoking is responsible for more than 25% of all deaths in India, and the country needs to take measures to reduce this alarming trend.
How Will the Proposed Tax Hike Affect Consumers? (Tobacco Gst Rate)
The proposed tax hike will likely increase the cost of cigarettes and tobacco products, making them less affordable for consumers. This could lead to a reduction in consumption, which is expected to help reduce the incidence of tobacco-related health problems.
What’s Next on? (Tobacco Gst Rate)
The GoM report is expected to be discussed by the GST Council on December 21. A final decision on the proposed GST rate changes will be made by the council, and it’s likely that there will be some level of resistance from stakeholders who are concerned about the impact of the tax hike on consumers.
Conclusion (Tobacco Gst Rate)
In conclusion, the proposed GST rate hike is a significant development that could have far-reaching consequences for cigarette stocks like ITC Godfrey Phillips and VST Industries. While the decision may seem counterintuitive, it’s aimed at addressing the growing concern of tobacco-related health problems in India. As the GoM report makes its way through the GST Council, stakeholders should be aware of the potential impact on consumers and companies alike.
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