The stocks of major tobacco companies in India, including ITC Ltd., Godfrey Phillips Ltd., and VST Industries Ltd., saw a decline following reports of a potential 35% tax on sin goods under the Goods and Services Tax framework. This proposal, made by the Group of Ministers on GST rate rationalisation, could have a significant impact on sales and profits for tobacco manufacturers. However, it is just one part of a larger GST reform plan, including other recommendations for tax adjustments and the end of the compensation cess in 2026.
On December 3, 2024, the Goods and Services Tax Council met in Jaisalmer to discuss important pre-budget consultations and health-related matters. Among the key decisions made were the proposal to increase GST on cigarettes, tobacco, and beverages to 35%, and the request for an extension for the GoM to submit its report on GST compensation cess. The Council also planned to discuss potential tax cuts for non-alcoholic beverages based on sugar and the rationalization of GST rates. Additionally, the meeting aimed to address concerns surrounding the GST on health insurance and the potential reduction of insurance levies.