Sensex Remains Positive; Cigarette Stocks Decline

After opening the day on a positive note, the share markets in India continue to trade above the dotted line. Barring FMCG stocksPSU stocks and capital goods stocks, all sectoral indices are trading in green, with stocks in the information technology sector & metal sector leading the gains.

The BSE Sensex is trading higher by 57 points (up 0.2%) while the NSE Nifty is trading higher by 20 points (up 0.2%). The BSE Mid Cap index is trading down by 0.1% while BSE Small Cap index is trading up by 0.1%. Gold prices, per 10 grams, are trading at Rs 28,040 levels. Silver price, per kilogram, is trading at Rs 37,165 levels. Crude oil is trading at Rs 3,003 per barrel. The rupee is trading at 64.45 to the US$.

Shares of cigarettes companies such as ITC share priceGodfrey Phillips share price, and VST Industries share price slipped up to nearly 3% today following the news buzz that the GST Council may consider hiking the compensation cess on cigarettes if prices come down post the implementation of the Goods and Services Tax (GST).

After implementation of GST, cigarettes fall in the highest 28% bracket and attract an additional cess depending on their length.

Notably, the effective levy is about 8% lower than earlier, as per the reports. This is mostly due to the drop of additional excise duty under GST regime.

However, cigarette manufacturing companies are yet to revise prices post GST. If the price of cigarettes come down, the government may not look at levying central excise duty but may consider increasing the cess on the demerit good, the reports noted.

As we have saying, GST is a much-needed economic reform. It should eventually expand India's narrow tax base and increase government revenues.

That said, every coin has two sides. GST is no exception. It will have its fair share of chaos in the coming months.

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