The profit will be less than one percent. (Representative)
New Delhi:
According to experts, the 16 per cent increase in duty on cigarettes announced in the Union Budget 2023-24 will have a marginal impact of around 7-12 paise per stick across cigarette categories.
He added that this hike in National Calamity Contingent Duty (NCCD) will have negligible impact on smokers and companies can easily absorb the shock as there may be no impact on margins.
Finance Minister Nirmala Sitharam on Wednesday proposed to increase the duty on cigarettes by revising it to about 16 per cent in the Union Budget for 2023-24.
“The National Calamity Contingent Duty (NCCD) on specified cigarettes was last revised three years ago. It is proposed to be revised by about 16 per cent,” he said in his budget speech in Parliament.
On the impact of the move, Anand Kulkarni, director, Crisil Ratings, said, “The upward revision in NCCD on cigarettes is not expected to have a material impact on the profitability of cigarette manufacturers. A 15-16 per cent increase will result in incremental growth.” The cost has come down by 7-12 paise per stick across cigarette categories (depending on size, filter etc).
He said the profitability would be less than one per cent and would not affect the credit profile of the players.
Similarly, Awanish Roy, executive director and head of research committee at Nuwama Institutional Equities, said the overall impact would be negligible.
“This growth seems to be below our and the market’s expectations, hence a positive for ITC and other cigarette companies,” he added. The issue, given the barely three-year increase in prices for the consumer, would be easily absorbed by the consumer”.
After the announcement in Budget 2023-24, the excise duty on filter cigarettes of length more than 70 mm but not exceeding 75 mm will increase from Rs 545 per 1,000 sticks to Rs 630 per 1,000 sticks.
Similarly, the excise duty on filter cigarettes of length more than 65 mm but not exceeding 70 mm will be increased from Rs 440 per 1,000 sticks to Rs 510 per 1,000 sticks, while for filter cigarettes of length more than 65 mm it will be Rs 510 per 1,000 sticks. 1,000 will be Rs. Stix, Rs.440 onwards.
Excise duty increased from Rs 200 to Rs 230 per 1,000 sticks for non-filter cigarettes of length more than 65 mm, and to Rs 290 per 1,000 for length more than 65 mm but not exceeding 70 mm Has been done. The first sticks to Rs 250 per 1,000 sticks.
Excise duty on tobacco substitute cigarettes has also been increased from Rs 600 to Rs 690 per 1,000 sticks. Roy pointed out that the duty on cigarettes has grown exponentially at a CAGR of 15.7 per cent during FY13-17. However, tax revenue from cigarettes grew at a mere 4.7 per cent CAGR and thereafter saw relative stagnation in taxation till January 2020.
In the Union Budget for FY2020-21, the government had increased the NCCD in cigarette stick sizes by 2-4 times, resulting in a tax increase of 9-15 per cent. He said the sector is already facing challenges from illegal cigarettes and a sharp tax hike could push consumers to smuggle cigarettes.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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