Why ITC, Varun Beverages, Godfrey Phillips shares dropped today

Shares of cigarette players such as ITC Ltd and Godfrey Phillips and bottler Varun Beverages Ltd fell up to 3 per cent in Tuesday's trade after Business Today quoting finance ministry sources suggested that the Group of Ministers (GoM) on rate rationalisation proposed a “different tax treatment” for sin goods such as cigarettes, tobacco and pan masala. Other reports suggested proposal for 35 per cent special GST tax on aerated drinks as well.

Shares of ITC fell 2.94 per cent to hit a low of Rs 463.10. Godfrey Phillips India declined 2.45 per cent to Rs 5,616.85. VST Industries was down 0.12 per cent at Rs 325.30. The PepsiCo bottler Varun Beverages slipped 3 per cent to Rs 613.80.

While the final decision rests with the council, which is slated to meet in the third week of December in Jaisalmer, reports suggested the GoM may propose a 35 per cent special GST rate on aerated drinks, Tobacco and Tobacco products.

Sin goods under GST include products considered harmful or undesirable such as cigarettes, other tobacco products, carbonated drinks and pan masala. These goods are often taxed at the highest GST slab to discourage their consumption.

At present the GST slab for cigarette and tobacco products are 28 per cent with an additional compensation cess ranging from 11 per cent to 290 per cent, set to expire in March 2026. At present, there are four slab structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent. As per the BT report, the GoM has also discussed merging GST slabs, evaluating three potential options for a three-slab rate structure. However, sources indicate it was deemed premature to recommend changes to the existing slabs.

The GoM on rate rationalisation is chaired by Bihar Deputy Chief Minister Samrat Choudhary and includes six members: Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Kerala Finance Minister KN Balagopal.