ITC slumps on worries over higher taxes in Union Budget - Economic Times

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NEW DELHI: Shares of country's biggest cigarette manufacturer ITC Ltd plunged as much as 4.3 per cent in trade on Monday to record its worst percentage loss since May 19, on reports that the government may raise taxes on cigarettes aggressively in the upcoming budget in July.

ITC slipped as much as 4.3 per cent in trade today and was also the top loser on both Sensex and Nifty. At 11:10 am; the stock was trading 4.2 per cent lower at Rs 321.50. It hit a low of Rs 321.25 and a high of Rs 335 in trade today.

Union health minister Harsh Vardhan has sought an increase in tax on cigarettes of all lengths by Rs 2 to Rs 3.5 per stick as well as removal of tax exemption granted to bidi makers, measures that can deter people from smoking by making a puff dearer, ET reported over the weekend.

In a letter sent on Thursday, Vardhan urged finance minister Arun Jaitley to raise tax on retail price of cigarettes from 45per cent to over 60per cent in the upcoming budget. This, he said, would add Rs 3,800 crore to the government's revenue and save at least four million lives, said the report.

Although the previous government had raised tax on cigarettes by about 19 per cent in February 2013, the increase was too little to lower consumption, Vardhan said.

The revision did not have the desired impact at the time since higher taxes were targeted at longer cigarettes and the industry sought to evade the revised taxes by switching to cigarettes of shorter length.

The report also highlighted that even with this substantial hike, cigarettes and bidis would remain a very profitable business, Vardhan said. Besides, this would not mean net loss of jobs in bidi industry, the minister said.

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