Tobacco, Gaming Stocks Decline as Centre Considers 40% GST on Sin Goods

Market Performance

Tobacco and online gaming stocks came under pressure on Monday, August 18, 2025, after reports suggested the government may retain a 40% GST slab on sin goods under the proposed GST 2.0 framework.

• ITC, Godfrey Phillips, VST Industries: Down 0.5%–1%

• Nazara Technologies, Delta Corp: Fell nearly 2%

• Sector Sentiment: Weakness prevailed across tobacco and gaming counters

GST 2.0 Proposal

The Centre is working on a restructuring of the Goods and Services Tax (GST) framework. The new system would replace the existing multi-slab structure with two key rates — 5% and 18% — while keeping sin goods at the maximum 40% slab.

Sin Goods Under Focus

• Tobacco products

• Online gaming

• Other specified demerit goods

This structure ensures these categories continue to attract the highest permissible GST levy.

Current Tax Burden on Cigarettes

Cigarettes are already among the most heavily taxed items in India. The current taxation structure involves multiple components:

• GST & Cess: 28% base GST plus variable cess (5–36%) → ~15–26% of MRP

• Fixed Cess per Stick: ₹2.1–₹4.2 → ~25–30% of MRP

• Excise Duty & NCCD: Additional 5–7%

Together, the tax burden on cigarettes currently stands at 48–55% of MRP.

Implications of the Proposal

If cigarettes are placed directly under a flat 40% GST slab, it could streamline the taxation process. However, tobacco and gaming stocks reacted negatively to the reports, reflecting concerns around the continued heavy tax burden on these sectors.

Summary

Tobacco and gaming stocks such as ITC, Godfrey Phillips, VST Industries, Nazara Technologies, and Delta Corp slipped on August 18, 2025, after reports that the Centre may levy a 40% GST on sin goods under GST 2.0. While the proposal aims to simplify the overall tax system with a two-tier structure, sectors under the sin goods category continue to face the highest tax rates.