Why Excise Duty Hit ITC, VST Shares but Not Elitecon Stock
Shares of major cigarette and tobacco product manufacturers remained under pressure on Friday, January 2, 2026, despite a positive start in the broader stock market. Benchmark indices Sensex and Nifty opened higher, supported by buying from domestic institutional investors, but tobacco stocks continued to slide.
During early trade, ITC shares fell 5.11% to hit a 52-week low of ₹345.35 on the BSE. Godfrey Phillips India dropped 4.58% to ₹2,184.60, while VST Industries declined 2.56% to ₹248.60.
In contrast, Elitecon International Ltd defied the bearish trend. Its stock opened gap-up by 2.4%, trading at ₹104.90 compared to the previous close of ₹102.44.
Why Are Tobacco Stocks Falling?
Cigarette and tobacco stocks are facing selling pressure after the central government imposed an additional excise duty, effective February 1, 2026.
The Finance Ministry has amended the Central Excise Act, introducing a fresh excise duty ranging from ₹2,050 to ₹8,500 per 1,000 cigarette sticks, depending on cigarette length.
This new levy will be in addition to the existing 40% GST, replacing the earlier tax structure that included 28% GST plus compensation cess.
Market participants fear that higher taxation could:
Reduce cigarette demand
Impact profit margins
Lead to price hikes, affecting volume growth
This explains the sharp decline in stocks like ITC, Godfrey Phillips, and VST Industries.
Why Did Elitecon International Share Price Rise?
Unlike traditional cigarette manufacturers, Elitecon International operates on an export-driven business model.
Key Reason:
Under the GST framework, tobacco exports are zero-rated, meaning the newly announced excise duty does not apply to export-focused companies.
Elitecon exports its products to over 50 countries, shielding it from domestic tax changes.
Strong Export Orders Boost Elitecon
In December 2025, Elitecon International secured a two-year export contract worth ₹875 crore (USD 97.35 million) with Yuvi International Trade FZE, significantly strengthening its revenue visibility.
FMCG Expansion Adds Confidence
Apart from exports, the company is diversifying its business. Elitecon recently acquired majority stakes in Landsmill Agro and Sunbridge Agro, marking its entry into the FMCG sector. This strategic move has further boosted investor confidence.
Frequently Asked Questions (FAQ)
Q1. Why are ITC, VST, and Godfrey Phillips shares falling?
They are impacted by the new additional excise duty on cigarettes, which may hurt profitability and demand.
Q2. From when is the new excise duty applicable?
The additional excise duty will come into effect from February 1, 2026.
Q3. Why is Elitecon International not affected?
Elitecon mainly focuses on exports, which are zero-rated under GST, so domestic excise duty does not apply.
Q4. What major deal did Elitecon recently secure?
Elitecon signed a ₹875 crore export contract with Yuvi International Trade FZE in December 2025.
Q5. Is Elitecon expanding beyond tobacco?
Yes, the company is entering the FMCG sector through acquisitions of Landsmill Agro and Sunbridge Agro.
Conclusion
The sharp divergence in tobacco stocks highlights how business models matter during policy changes. While domestic cigarette manufacturers like ITC, VST Industries, and Godfrey Phillips face pressure due to higher taxation, export-focused players such as Elitecon International remain insulated.
With strong export orders and FMCG diversification, Elitecon continues to attract investor interest, even as the broader tobacco sector grapples with regulatory headwinds.
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