ITC Shares In Trouble? Excise Duty Hike Triggers Sharp Fall As Analysts Warn Of Price And Volume Impact

ITC Share Price: ITC shareholders had a bad day on Friday. The stock price of the conglomerate dropped more than 5%, which was the continuation of the losses for the second day, after the government announced a significant new excise tax on cigarettes, which would be effective from February 1.

In the early hours of trading, ITC reached a new 52-week low of ₹345.25, which made the investors very confused and they had to double-check their screens. So, what is the reason of the sudden sell-off? Parliament has sanctioned the Central Excise (Amendment) Bill, 2025, which imposes an extra excise duty on cigarettes that is in addition to the current 40% GST.

The analysts are cautious and say that the price might go up by 22–28% for some of the cigarette varieties, thus driving the consumers to switch over to the cheaper or illegal alternatives. Now, investors have a riddle: will ITC be able to pass on the tax to the consumer or will there be a decline in volumes and earnings? For traders, the stock’s ups and downs make it necessary to pay close attention to every tick in the price chart.

Why Are ITC Shares Falling? Tax Shock Hits Cigarette Prices

Investors are puzzled to the max as a steep fall in ITC shares took place, and the reason for this is quite obvious: The Central Excise (Amendment) Bill, 2025 got the green light from the Parliament. The action causes an increment in excise duties on cigarettes and tobacco products in addition to the already applied 40% GST, hence both the producer and the consumer are getting hurt by the imposition of this tax. The analysts are foreseeing that this will ultimately make the prices of the 75-85 mm cigarettes go up by about 22-28% in total.

So, what about your preferred King Size Filter (KSFT) cigarettes? The retail prices might go up by 2-3 Rupees a stick, which will affect almost 16% of ITC’s total volumes. The consumers might downtrade to cheaper alternatives or, even worse, resort to the illegal market, which could impact sales volumes.

Investor Pointer: ITC may attempt to transfer the tax burden to consumers, but the main issue is if the stock is capable of keeping its position in the event of tax increases and the coolness of investor sentiment.

Brokerage Outlook On ITC Shares

• JPMorgan

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  • Downgraded rating to Neutral
  • Target price reduced to ₹375 (from ₹475)
  • Expects ITC to largely pass tax costs to consumers
  • Predicts restricted stock upside over next 6–9 months

• Nuvama

  • Downgraded rating to Hold
  • Target price: ₹415 (14% upside potential)
  • Projects over 20% price hike and 30% tax hike
  • Cuts EBITDA estimates by 7% for FY27 and FY28

• Motilal Oswal

  • Rating: Neutral
  • Target price: ₹400
  • Notes sharp tax increase is unprecedented, surprising given stable taxes in previous years

(With Inputs)

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