On Thursday, Indian tobacco companies’ shares fell as the government raised cigarette taxes, making them more expensive for 100 million smokers in the world’s most populous nation.

ITC (ITC.NS), manufacturer of Gold Flake and market leader, slumped 9.2%, while Godfrey Phillips India (GDFR.NS), Marlboro distributor, fell 14.1%.

The government has not indicated how the duty adjustment will affect retail pricing, but economists say higher taxes could cause companies to boost prices.

The tariff raises 75-85 mm cigarette prices by 22%-28%, according to ICICI Securities analysts.
“Cigarettes longer than 75 mm account for roughly 16% of ITC’s volumes and are likely to see price increases of 2–3 rupees per stick as a result of the levy,” stated.

The order stated that the new tax will supplement the 40% Goods and Services Tax.

Smoking-related health issues consume India’s resources, hence the government has increased warning labels and pricing modifications to reduce usage.