Fears of higher tax incidence on cigarettes hit ITC
Cigarette major ITC lost nearly 4% to Rs 168.75 following reports tobacco products are likely be brought under the ambit of state-level value added tax (VAT).
The stock declined on high volume of 26.7 lakh shares on BSE.The scrip had recovered from lower level over the past few days. From a low of Rs 169.65 on 22 December, the scrip rose 3.3% to Rs 175.35 by 3 January 2007.
The centre has agreed to allow states to levy VAT on tobacco and tobacco products which is under additional excise duty. This follows agreement between the centre and states reached on Wednesday (3 January 2007) to phase out central sales tax (VST) over next four years.
A 12.5% VAT on cigarettes would lead to a steep hike in cigarette prices which in turn may hit cigarette volumes. The concern for the cigarette industry is that higher taxes on cigarette may result into shift in tobacco consumption to lower end of the value chain such as bidis and chewing tobacco.
Last week, ITC Marubeni Corp, Japan's third-largest trading company with revenues of $27 billion, inked a food business alliance with the international business division (IBD) of ITC. Under the alliance, both companies will consider jointly exporting Indian-made soyabean cake and maize grains for livestock feed. Along with ITC, Marubeni will also consider jointly building silos and other grain-related facilities and launching a soyabean protein business.
Although renowned for its cigarette brands, ITC also has business interests in hotels, paperboards, paper & packaging, agri exports and some other FMCG products like branded packaged foods, safety matches, incense sticks and greeting cards.
Last month ITC said it planned to expand its fruits and vegetable retail and wholesale business Choupal Fresh by opening 54 new outlets over the next three years. The company currently has a handful of Choupal Fresh outlets in Hyderabad and Pune, since the first outlet opening in August 2006. The company also plans to increase the number of its rural hypermarket outlets, Choupal Saagar, by nine more stores from the current 11.
ITC is also setting up production facilities for making biscuits at Uttaranchal and West Bengal. It has been outsourcing manufacturing to third-party vendors so far.
The stock declined on high volume of 26.7 lakh shares on BSE.The scrip had recovered from lower level over the past few days. From a low of Rs 169.65 on 22 December, the scrip rose 3.3% to Rs 175.35 by 3 January 2007.
The centre has agreed to allow states to levy VAT on tobacco and tobacco products which is under additional excise duty. This follows agreement between the centre and states reached on Wednesday (3 January 2007) to phase out central sales tax (VST) over next four years.
A 12.5% VAT on cigarettes would lead to a steep hike in cigarette prices which in turn may hit cigarette volumes. The concern for the cigarette industry is that higher taxes on cigarette may result into shift in tobacco consumption to lower end of the value chain such as bidis and chewing tobacco.
Last week, ITC Marubeni Corp, Japan's third-largest trading company with revenues of $27 billion, inked a food business alliance with the international business division (IBD) of ITC. Under the alliance, both companies will consider jointly exporting Indian-made soyabean cake and maize grains for livestock feed. Along with ITC, Marubeni will also consider jointly building silos and other grain-related facilities and launching a soyabean protein business.
Although renowned for its cigarette brands, ITC also has business interests in hotels, paperboards, paper & packaging, agri exports and some other FMCG products like branded packaged foods, safety matches, incense sticks and greeting cards.
Last month ITC said it planned to expand its fruits and vegetable retail and wholesale business Choupal Fresh by opening 54 new outlets over the next three years. The company currently has a handful of Choupal Fresh outlets in Hyderabad and Pune, since the first outlet opening in August 2006. The company also plans to increase the number of its rural hypermarket outlets, Choupal Saagar, by nine more stores from the current 11.
ITC is also setting up production facilities for making biscuits at Uttaranchal and West Bengal. It has been outsourcing manufacturing to third-party vendors so far.
posted by SY at 4:05 PM
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