By Bulletin Times 
ITC, Varun Beverages Slide Amid GST Hike Buzz: What’s Behind the Dip?
Shares of ITC and Varun Beverages tumbled on Tuesday, losing up to 5% during intra-day trade, even as the broader market remained upbeat. The decline came amid speculation that the government may increase the Goods and Services Tax (GST) on cigarettes, tobacco, and aerated drinks to 35%, up from the current 28%.
Stocks React Sharply
Varun Beverages saw its shares fall to ₹600, a 5% drop in just a single trading session, driven by heavy volumes. ITC wasn’t spared either, slipping 3% to ₹462.80 during the day. Both stocks have already retreated significantly from their record highs—ITC is down about 12% from its peak of ₹528.55 in late September, while Varun Beverages has shed 10% since its July high of ₹682.84. Even Godfrey Phillips saw a dip, briefly touching ₹5,576 before recovering slightly to ₹5,669.
What’s Driving the Market Fear?
Reports suggest that the Group of Ministers (GoM) on GST rationalization, led by Bihar’s Deputy Chief Minister Samrat Chaudhary, has proposed introducing a higher 35% tax slab for products like tobacco and aerated drinks. These products are currently taxed at 28%. The news has spooked investors, who are concerned about potential margin pressures on companies in these sectors.
Big Players Under the Microscope
Varun Beverages, a key PepsiCo franchisee and a dominant name in India’s beverage industry, produces household brands like Pepsi, Mountain Dew, Tropicana, and Aquafina. Despite its strong market position, a higher GST rate could impact profitability, especially on its flagship carbonated drinks.
On the other hand, ITC, India’s leading cigarette manufacturer, has been navigating a tough regulatory environment for years. In its FY24 annual report, ITC pointed out that cigarette taxes in India are already among the highest globally—14 times higher than the US, seven times Japan, and six times Germany. Despite these challenges, the company has delivered a remarkable 110% stock return over the past three years.
A Long-Term Perspective
While the potential tax hike might hurt in the short term, both ITC and Varun Beverages have shown resilience in the face of past regulatory changes. Over the last three years, Varun Beverages’ stock has skyrocketed 424%, outpacing the BSE Sensex’s 39% growth by a wide margin. This resilience suggests that these companies could adapt and emerge stronger in the long run.
What’s Next?
The proposed GST changes are still in the recommendation phase, and it’s unclear when or if they will be implemented. However, the market will likely remain jittery until there’s more clarity. For now, ITC and Varun Beverages are under the spotlight, with investors watching closely to see how they navigate the latest tax challenge.