Here’s How Budget’s 16% Duty Hike On Cigarettes Will Impact Prices

New Delhi:

The responsibility hike on cigarettes by 16 per cent introduced within the Union Price range 2023-24 would have a nominal affect of round 7-12 paise per stick throughout cigarette classes, in keeping with consultants.

This upward revision in Nationwide Calamity Contingent Responsibility (NCCD) would have negligible affect on people who smoke and the businesses may simply take in the shock as it might not even have any resultant affect on margins, they mentioned.

Finance Minister Nirmala Sitharama within the Union Price range for 2023-24 on Wednesday proposed to revise and enhance the responsibility on cigarettes to about 16 per cent.

“Nationwide Calamity Contingent Responsibility (NCCD) on specified cigarettes was final revised three years in the past. That is proposed to be revised upwards by about 16 per cent,” she mentioned in her Price range speech in Parliament.

On the affect of the transfer, Crisil Rankings Director Anand Kulkarni mentioned, “The upward revision in NCCD on cigarettes just isn’t anticipated to have a fabric affect on the profitability of cigarette producers. The hike of 15-16 per cent will end in a rise in value by 7-12 paise per stick throughout cigarette classes (primarily based on measurement, filter, and many others)”.

The profitability shall be lower than one per cent and won’t have any bearing on the credit score profiles of gamers, he added.

Equally, Nuvama Institutional Equities Govt Director & Head of Analysis Committee Abneesh Roy mentioned the general affect can be negligible.

“This enhance appears decrease than our and road expectations, so a constructive for ITC and different cigarettes firms,” he mentioned including “cigarettes firms will want solely low single-digit hike of round 2 to three per cent, which isn’t a lot of a difficulty, given three years of hardly any enhance in costs for the patron, shall be simply absorbed by client”.

Following the announcement within the Price range 2023-24, excise responsibility on filter cigarettes of size greater than 70 mm however not exceeding 75 mm will go as much as Rs 630 per 1,000 sticks from Rs 545 per 1,000 sticks.

Equally, excise on filter cigarettes of size over 65 mm however not exceeding 70 mm will go as much as Rs 510 per 1,000 sticks from Rs 440 earlier, whereas the identical for filter cigarettes of size not exceeding 65 mm shall be Rs 510 per per per 1,000 sticks, up from Rs 440.

For non-filter cigarettes of size not exceeding 65 mm, excise responsibility has been hiked to Rs 230 per 1,000 sticks from Rs 200, and for these of size exceeding 65 mm however not exceeding 70 mm, it has been elevated to Rs 290 per 1,000 sticks from Rs 250 per 1,000 sticks earlier.

Excise responsibility on cigarettes of tobacco substitutes has additionally been elevated to Rs 690 per 1,000 sticks from Rs 600. Roy identified that in FY13-17, responsibility on cigarettes elevated sharply at a CAGR of 15.7 per cent. Nevertheless, tax income from cigarettes grew a mere 4.7 per cent CAGR, and thereafter, relative stability in taxation was noticed till January 2020.

Within the Union Price range for FY2020-21, the federal government had elevated NCCD by 2-4x throughout cigarette stick sizes, leading to tax hikes of 9-15 per cent. The sector is already going through challenges of illicit cigarettes and a pointy tax hike may push shoppers to smuggled cigarettes, he added.

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