New Delhi, Jan. 2 -- For ITC Ltd, the new year began on a gloomy note. Cigarette taxes are set to increase, which would hurt the company's volumes, potentially hitting revenue growth and profitability.

The government has notified changes in excise duty rates on cigarettes effective 1 February, replacing the compensation cess. Notably, the increase in the total tax burden this time around is far higher than expected, after also factoring in the goods and services tax (GST) rate hike to 40% from 28% on retail prices.

"Our estimates suggest that the overall tax burden could result in an effective hike of 50% at the portfolio level, assuming no mix change and status quo on the NCCD," noted Jefferies India in a 1 January report. The NCCD is ...