On April 29, shares of major cigarette manufacturing companies experienced a notable rally in the stock market. According to industry reports, market leaders ITC and Godfrey Phillips are expected to implement a price hike of approximately 17% on cigarettes starting next month. 5%.
Price Hike Across Premium and Value Segments
The reports clarify that the price increase won't be restricted to premium cigarette offerings. Manufacturing companies are also planning to raise prices in their value segments, which include more affordable brands. This move is expected to directly impact a broad base of consumers, while for instance, the price of an ITC Goldflake Premium packet is projected to rise from its current level of approximately 115 rupees to 135 rupees by May 2026.
Impact of Central Excise (Amendment) Bill 2025
The primary driver behind this price adjustment is the increased tax burden following the passage of the Central Excise (Amendment) Bill, 2025, by Parliament earlier this year. Cigarettes are now subject to a 40% GST, in addition to an excise duty ranging from 2,050 rupees to 8,500 rupees per 1,000 sticks. According to industry experts, these fiscal changes have led to a 22-28% increase in the total cost for 75-85 mm cigarettes, a cost that's now being passed on to the end consumers.
Market Performance and FMCG Sector Outlook
Amidst these developments, the Nifty FMCG index also traded higher, gaining approximately 2%, with ITC emerging as a top performer. Financial experts suggest that while a price hike might lead to a temporary dip in sales volume, cigarette companies generally possess the pricing power required to maintain their profit margins by adjusting retail prices in response to cost pressures.
Should the pressure from taxation and operational costs continue to mount, further escalations in cigarette prices could be witnessed in the future. For the time being, consumers must prepare to pay higher prices for cigarettes starting this May.