ITC: Rationality in taxation is the key to mitigate the ad valorem tax impact :: Kotak Securities PDF link

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ITC (ITC)
Consumer products
Rationality in taxation is the key to mitigate the ad valorem tax impact. Re-entry
of ad valorem tax (after 25 years) means volume-led growth becomes important for
profit growth over the medium term. While the effective ~15% excise increase was in
line with expectations, the introduction of ad valorem duty is a likely precursor to GST
implementation (the possibility of the current specified rate of duty being migrated to
ad valorem in entirety exists). The opportunity to re-enter the Rs2 price point is a likely
tailwind for volumes and the Government’s intention to increase tax on bidis and
chewing tobacco probably indicates rational taxation of cigarettes. ADD.