The Hindu Business Line : ITC down on VAT reports

The stock of ITC Ltd has been under pressure following reports that the VAT panel has recommended phasing out of the Central Sales Tax (CST) over four years. This has raised concerns of the cigarette industry being hit by high taxes in the FY-08 budget. The counter ended at Rs 162.65 on the BSE today and has lost ground by 8 per cent week on week.

Analysts maintain that cigarettes will not bear the bulk of burden of compensation for loss from the CST phase out. The VAT panel is expected to look into determining VAT rate on cigarettes, after analysing the historical sensitivity of excise collections vis-à-vis excise hike imposed.

Historically, analysts maintain that, the growth in excise paid by ITC has been more than the excise rate hike except in FY-02, when the volumes declined by 8 per cent due to a 15 per cent hike in excise duties, resulting in lower excise collection. The moderate excise hike policy adopted in recent times is likely to continue and the combination of VAT rate and central excise hike is expected to be benign.

Deeptha Rajkumar

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