1 day ago
Shares of ITC Ltd., Varun Beverages Ltd., VST Industries Ltd., and other cigarette and beverage-linked companies will be in focus on Tuesday, December 3, after CNBC-TV18 reported about some rate rationalisation in the upcoming GST council meeting.
CNBC-TV18 reported on Monday, December 2, citing surces, that the Group of Ministers (GoM) have decided to propose a 35% special GST rate on aerated drinks, along with Tobacco and Tobacco products.
The sources further said that the 35% rate will be over and above the existing four slab structure of 5%, 12%, 18% and 28%.
Cigarettes is a significant contributor to ITC's overall topline and is one of the major businesses for the company aside of FMCG & other, Agri, Paper and Hotels.
For the September quarter, nearly 40% of ITC's topline came from the cigarettes business.
Brokerage firm Macquarie wrote in a note that currently, cigarettes attract a 28% GST rate and a compensation cess of 5% to 36% based on length of cigarette with the longest cigarette attracting a 36% compensation cess and others a 5% cess.
Macquarie said that if the said levy is over and above the existing compensation cess, ITC will need at least a single-digit price hike to offset this increase in taxes.
The brokerage is overweight on ITC with a price target of ₹560.
For Varun Beverages, PepsiCo's largest bottling partner, most of its revenue comes from aerated beverages, while for Godfrey Phillips and VST Industries, the topline comes from Tobacco and Tobacco products.
Shares of ITC had ended little changed on Monday at ₹477.4, while those of Varun Beverages ended 1.7% higher at ₹631.8.
Shares of VST Industries ended 0.8% higher on Monday at ₹325.95, while those of Godfrey Phillips ended with gains of 1.3% on Monday at ₹5,750.
(GST Newsbreak Done By Timsy Jaipuria.)
