Shares of Godfrey Phillips India fell over 4% in Thursday’s session, January 1, slipping to around Rs 2,650, after tobacco stocks came under pressure following fresh government notifications on higher levies on tobacco and pan masala products.
What led to the decline in Godfrey Phillips shares?
Tobacco stocks, including Godfrey Phillips India, moved lower after the government notified February 1 as the implementation date for new tax measures on tobacco and pan masala. The revised framework introduces additional excise duty on tobacco products and a Health and National Security Cess on pan masala, replacing the existing GST compensation cess.
From February 1, cigarettes, chewing tobacco, and similar products will attract a 40% GST, while biris will be taxed at 18% GST, as per the notification. These levies will apply over and above excise duty, raising concerns around overall tax incidence on tobacco manufacturers.
Regulatory changes add to sector pressure
The Finance Ministry also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, signalling tighter regulatory oversight across the tobacco value chain.
Parliament had cleared two key Bills in December 2025 enabling these changes. The Central Excise (Amendment) Bill, 2025 allows the government to levy excise duty on tobacco products after the GST compensation cess ends, while the Health and National Security Cess Bill, 2025 provides the framework for a new cess on pan masala manufacturing.
What changes for cigarette and tobacco taxation?
At present, tobacco products attract 28% GST plus a compensation cess at varied rates. From February 1, the compensation cess will be withdrawn and replaced with 40% GST along with excise duty.
The amended excise structure includes:
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Rs 5,000–Rs 11,000 per 1,000 sticks on cigarettes, depending on category
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60–70% duty on unmanufactured tobacco
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100% duty on nicotine and inhalation products
The notification has raised concerns around pricing flexibility, margins, and demand sensitivity, prompting selling pressure across cigarette and tobacco stocks.
Why Godfrey Phillips is in focus
Godfrey Phillips India derives a significant portion of its revenues from the cigarette business. As a result, clarity on higher taxes and the transition away from the compensation cess has led investors to reassess near-term earnings visibility, bringing the stock under pressure.
Bottom line
Godfrey Phillips India shares declined as the market reacted to confirmation of higher levies and regulatory changes impacting the tobacco sector. With the new tax regime set to come into force from February 1, tobacco stocks are likely to remain volatile as investors track the impact on volumes and profitability.
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