FMCG major ITC Ltd saw its shares rallying 4 per cent in Saturday's trade, as the government did not increase taxes on cigarettes, which is seen as positive. Besides, the government announced changes to income tax slabs, which is seen increasing the consumer spending and boost the FMCG firm's revenues.
ITC shares stock rose 4.41 per cent to hit a high of Rs 467.30 on BSE. Peer cigarette stock Godfrey Phillips India in fact climbed 9 per cent to Rs 4,928.30. VST Industries added 1.50 per cent to Rs 324.90. Golden Tobacco rose 5 per cent to Rs 39.91.
In the Budget, the FM said there will be no income tax payable upto income of Rs 12 lakh i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains, under the new regime. For the salaried class, no income tax is applicable till annual income of Rs 12.75 lakh, due to standard deduction benefit available to salaried class of Rs 75,000.
FMCG stocks such as Varun Beverages Ltd, Emami Ltd, Colgate-Palmolive, united Spirits, Britannia Industries, TCPL and Hindustan Unilever Ltd (HUL) rose 3-6 per cent.
Aniruddha Naha, CIO Alternatives, PGIM India Alternatives said: "The new income tax slabs and rebates have pushed up the annual incomes free from taxation from 7lacs to 12lacs. This is a big relief to the middle and lower middle class in terms of higher savings, which should drive consumption."
Sandeep Chilana, Managing Partner at CCLaw said raising the income tax exemption threshold to Rs 12 lakh is a deeply positive move, especially for the middle class. For many, it brings a much-needed relief, considering the increasing living costs and pressures of inflation.
"By increasing disposable income, the government is not only simplifying the tax system but also fostering consumer confidence. This change will impact a broad spectrum of individuals, particularly in urban areas, giving them more room to invest and spend. The overall restructuring of tax slabs, aimed at a more equitable distribution, is also an encouraging step towards creating a progressive tax environment.”
Shares of cigarette makers such as Godfrey Phillips India Ltd (down 10 per cent), VST Industries (down 6 per cent), Golden Tobacco Ltd (down 4.83 per cent) and ITC (down 3.7 per cent) had fallen up to 10 per cent in January, partly on such uncertainty.
Market analysts had earlier suggested that no tax hike on cigarette would be the best scenario for cigarette stocks, followed by a single-digit growth in taxes that they believe could be easily absorbed by cigarette makers. A double-digit hike, if it comes, would weigh on cigarette stocks, they said. Axis Securities had warned that the raising of excise duty or NCCD duty on cigarettes and tobacco products will have a bearing on cigarette players such as ITC, Godfrey Phillip and VST Industries.