In its 56th meeting on September 3 in New Delhi, the GST Council made some significant changes to tax regulations. They’ve decided to lower taxes on various renewable energy equipment, components, FMCG products, and several other products to encourage clean energy efforts.
On the flip side, they’ve raised the GST on sin goods like tobacco, cigarettes, gutkha, and carbonated drinks from 28 percent to a hefty 40 percent. This strategy is designed to deter people from consuming harmful products while also boosting sustainable energy initiatives.
Here are the stocks likely to be affected by the GST Uptick:
1. ITC
ITC Ltd is a diversified Indian conglomerate with businesses spanning FMCG, hotels, paper and packaging, agri-products, IT services, and real estate. Its product range includes cigarettes, snacks, beverages, personal care, stationery, and incense. It is also involved in agri-products and provides IT and project management services.
The company derives 41 percent of its revenue from selling cigarettes, and it is also the second largest contributor to its topline after the agri business. However, it is to be noted that in its Agri Business, it derives the majority of its revenue by selling Leaf tobacco, making it vulnerable to tax hikes.
2. Godfrey Philips
Godfrey Phillips India Limited stands out as a prominent player in the FMCG sector, focusing on the production and sale of cigarettes, tobacco products, and chewing items both in India and across international markets. The company boasts well-known brands like Red & White and Funda, and it also produces and distributes Marlboro through a licensing agreement with Philip Morris.
The company derives 99 percent of its revenue from tobacco sales, where 74 percent of its sales are exposed to the domestic market (cigarettes) and the rest 25 percent is exposed to the international market (Tobacco Leaf, Cigarettes & Processed tobacco).
3. Varun Beverages
Varun Beverages Limited is one of the largest bottlers for PepsiCo, and oversees several different products in its portfolio, such as soft drinks (Pepsi, 7UP, Mountain Dew), juices (Tropicana, Slice), water (Aquafina), and snacks (Lay’s, Doritos, Kurkure), among others. Varun operates in India and overseas in international markets such as Sri Lanka, Nepal, and parts of Africa. Varun has a firm foundation.
As of FY24, the company derived 74 percent of its revenue from the sales of carbonated soft drinks, and 6 percent is derived from its juice segment; both these segments now attract a 40 percent GST.
4. VST Industries
VST Industries Limited focuses on the manufacturing, trading, and marketing of cigarettes, tobacco, and other related products, both in India and on the international stage. They also deal in unmanufactured tobacco. Originally called Vazir Sultan Tobacco Company Limited, the company later rebranded itself as VST Industries Limited.
As of FY25, the company derived 73.80 percent of its revenue from the sales of cigarettes, and the rest 26.20 percent is derived from its unmanufactured tobacco segment; both these segments now attract a 40 percent GST.
5. Elitecon International
Elitecon International Limited is in the business of manufacturing and trading tobacco products both in India and abroad. They offer a variety of items, including cigarettes, khaini, zarda, and flavored tobacco, all under well-known brands like INHALE, Al Noor, and Gurh Gurh, and they also engage in global exports.
As of FY25, the company derived 92 percent of its topline from the sale of tobacco products, and the rest 8 percent is derived from the sale of agro products. This makes the company very vulnerable to tax hikes in the tobacco segment.
Written by Satyajeet Mukherjee
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