Sin tax on cigarettes to hit margins; factories could shut down as volume shrinks: YC Deveshwar, ITC

In a chat with ET Now, YC Deveshwar, Chairman, ITC, talks about the likely impact of GST on the FMCG space. Excerpts:

ET Now: What are your expectations from the GST bill? What kind of jolt could FMCG players face after it is implemented?

YC Deveshwar: I cannot measure the size of the jolt. But GST is crucial to make India competitive. So, everybody agrees that GST is a good thing and that it should go through. We are all hoping it does.

ET Now: Don't you think parties should come together to get GST passed in this Session itself? What hopes have you of it happening?

YC Deveshwar: As a citizen of India, I would obviously like to see things that are good for the society. I hope things are agreed upon quickly and a forward move happens.

ET Now: The ' Sin tax' means tobacco and other such products will now be taxed higher. How badly will it impact you?

YC Deveshwar: It is the cigarettes that are being taxed heavily; tobacco, per se, is not. This tax isn't going to affect tobacco as a whole. Chewing tobacco and bidis are not taxed so heavily.

But it is the cigarettes that account for 85% of revenue to the exchequer. That count has shrunk from being 22%-23% of the industry to 11% now. To that extent, it's a discriminatory tax.

ET Now: Could some factories shut down owing to such high taxes, in line with what Coca-Cola predicts?

YC Deveshwar: That is natural. It could be a natural thing when volumes shrink drastically.

ET Now: What impact do you see on Indian economy of the Fed hike, which at this point is very likely?

YC Deveshwar: If I had a crystal ball, I would be very rich man. But I don't, so I have no idea.