Macquarie has maintained an Outperform rating on ITC with a target price of ₹560, reflecting optimism about the company’s resilience despite emerging tax concerns.
Key highlights:
- Tax implications: Media reports suggest a potential 35% special rate for cigarettes, which may replace or complement the current compensation cess.
- Existing tax structure: Cigarettes are currently taxed at 28% GST, along with a compensation cess ranging from 5% to 36%, depending on the length of the cigarette. The longest cigarettes attract the highest cess rate of 36%, while others are taxed at 5%.
- Impact analysis: If the proposed 35% special rate is levied in addition to the existing cess, ITC might require a high single-digit price hike to offset the increased tax burden.
The brokerage believes that ITC’s pricing power and operational efficiencies position it well to navigate potential regulatory changes, though the tax development will need close monitoring.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making any investment decisions.