Budget 2023: Cigarettes to become expensive after FM increases sin tax

Finance Minister Nirmala Sitharaman has announced a 16 per cent increase in the customs duty on cigarettes. The announcement was made in the Union Budget presented by Finance Minister Nirmala Sitharaman on Wednesday. 

"Taxes on cigarettes will be hiked by 16 per cent," said the finance minister.

The announcement has made a negative impact on the shares of cigarette companies, including Godfrey Phillips India and ITC Ltd. The shares of both companies fell over 5 per cent after the announcement by Sitharaman.

"Net tax on cigarettes would increase by 0.07 per stick to 0.12 per stick, which would require a 1-3% price hike for cigarette in difference category. The hike in taxes is not very high & would be easily passed on by small increase (1-3%) in prices," said ICICI Securities.

Meanwhile, in a relief to the middle class, FM has announced a reduction in tax liabilities.

Mr Sandeep Agrawal Director & Co-founder of Teamlease Regtech explained, "Union Budget 2023-24 has reduced the tax liabilities for middle-class individuals with revisions to the number of tax slabs (reduced from 6 slabs to 5 slabs) & increase in the limits within each slab in the new tax regime. Now, an individual with an annual income of up to Rs. 3 lakh will not have to pay any tax (as against an earlier limit of Rs. 2.5 Lakhs). Further, it proposes a 5% tax for Income between 03 – 06 Lakhs, 10% for income between 06 – 09 lakh, 15% for income between 09 – 12 lakh, 20% for income between 12 – 15 lakh, and 30% above 15 lakh. This will result in around 25% reduction in tax liability for individuals with income up to Rs. 9 lakh and around 20% reduction in tax liability for individuals with income up to Rs. 15 lakh."

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