Indian Cigarette Firms Report Profit Drops After Tax Hike

Major Indian cigarette manufacturers reported declines in net revenue, sales volumes, and profitability for the April-June quarter of FY27. The downturn follows a February 2026 tax overhaul by the Government of India, which replaced a 28% GST and compensation cess with a flat 40% GST and a new additional excise duty ranging from Rs 2,100 to 8,500 per 1,000 sticks.

ITC Limited, the domestic market leader, saw its gross cigarette revenue rise to Rs 16,596.67 crore due to duty pass-throughs, but its net revenue excluding duty dropped 31.45% to Rs 3,769.11 crore. The company described its staggered pricing approach as a "strategic and calibrated response by the Cigarettes Business to the unprecedented increase in tax, balancing the interests of all stakeholders."

Other industry leaders experienced similar losses. Godfrey Phillips India reported a 44.3% decline in consolidated net profit to Rs 198.39 crore, with net revenue excluding excise falling 18.8% to Rs 1,206 crore. VST Industries reported a 24.42% drop in profit after tax and a 14% shrink in cigarette volume. Collectively, these companies control 90% of the domestic market and have responded to the tax burden through portfolio adjustments and price hikes.