ITC tanks 13% as GST Council hikes cess on cigarettes. Should you sell?

Shares of India’s largest cigarette maker, ITC, plunged nearly 13 per cent on Tuesday, its single biggest intra-day fall since May 12, 1992, after the Goods and Services Tax (GST) Council on Monday increased cess on cigarettes. The stock had plunged 15 per cent in intra-day deals on Tuesday — the sharpest fall in a decade — to hit a low of Rs 276.4 on the National Stock Exchange (NSE). Stock prices of other cigarette makers Godfrey Phillips and VST Industries, too, fell 6-8 per cent because of the hike, which came after market hours on Monday. While investors in ITC saw their wealth decline by about Rs 50,000 crore, the fall in ITC’s stock price was the single biggest reason for the S&P BSE Sensex shedding 364 points to close at 31,711. Financial Astrology Tips

The increase in cess, according to Finance Minister Arun Jaitley, was taken to “reduce profiteering by companies and harm to public health.” The finance ministry indicated that the total tax incidence in the GST regime had come down compared to the total tax in the pre-GST regime. 

After the recent hike in cess, the average effective tax has increased by 10-11 per cent, which will require an 8-9 per cent increase in retail prices to offset the effect. With the 6 per cent hike in the Union Budget 2017-18, the total increase in taxes amounts to 16-17 per cent for FY18, according to Edelweiss Securities. The recent hike means that total tax on cigarettes is higher than pre-GST levels.  Astrology and Numerology Trading Tips