ITC Limited cigarette revenue surge reflects excise tax accounting

ITC Limited reported Rs 15,536.13 crore of cigarette segment revenue for the quarter ended 30 September 2026, versus Rs 8,722.83 crore a year earlier, but ITC says the increase includes the effect of sharply higher excise duty introduced from 1 February 2026 after the Goods and Services Tax compensation cess expired.

Why is ITC cigarette revenue not strictly comparable?

ITC says its cigarette revenue is not strictly comparable with earlier periods because the Government of India increased Goods and Services Tax, or GST, and central excise duty on cigarettes from 1 February 2026, following expiry of the GST Compensation Cess. The company specifically says gross revenue from sale of products and services, and excise duty, for the quarters ended 30 June 2026 and 30 September 2026 and the six months ended 30 September 2026 reflect this sharp excise-duty increase.

The accounting mechanism is central to the reported change. Under Indian Accounting Standard 115, Revenue from Contracts with Customers, and Schedule III of the Companies Act, 2013, ITC excludes GST and GST Compensation Cess from gross revenue from product sales, while excise duty is not excluded. Thus, the new excise duty increases both the reported gross revenue line and the expense line, rather than representing a like-for-like change in cigarette sales income across periods.

In the standalone statement, gross revenue from sale of products and services was Rs 28,152.21 crore in the September 2026 quarter, compared with Rs 19,207.82 crore in the corresponding September 2025 quarter. Excise duty was Rs 9,916.65 crore, compared with Rs 1,360.74 crore. ITC’s note does not quantify the exact portion of gross revenue growth attributable to the tax change, but it expressly directs readers not to treat the affected periods as strictly comparable.

How much did ITC cigarette revenue and excise duty change?

ITC reported Rs 15,536.13 crore of cigarette segment revenue in the three months ended 30 September 2026, up from Rs 8,722.83 crore in the corresponding 2025 quarter and Rs 15,383.55 crore in the preceding June 2026 quarter. The September 2026 figure is part of the FMCG segment, which reported total revenue of Rs 22,503.30 crore, including Rs 6,967.17 crore from FMCG-Others.

The quarter-on-quarter comparison also shows why the tax treatment needs to be separated from operating interpretation. Excise duty was Rs 10,035.63 crore in the June 2026 quarter and Rs 9,916.65 crore in the September 2026 quarter, while cigarette revenue was Rs 15,383.55 crore and Rs 15,536.13 crore respectively. Both quarters came after the 1 February 2026 tax change, unlike the September 2025 comparison period.

For the six months ended 30 September 2026, cigarette revenue was Rs 30,919.68 crore, against Rs 17,242.87 crore a year earlier. Excise duty for the same six-month period was Rs 19,952.28 crore, compared with Rs 2,669.81 crore in the six months ended 30 September 2025. ITC’s disclosure applies its non-comparability warning to exactly these six-month revenue and excise-duty figures.

What does the tax change mean for ITC profit?

The tax-accounting change means headline revenue growth should not be read as a direct indicator of comparable cigarette profitability. ITC’s cigarette segment result was Rs 3,813.45 crore in the September 2026 quarter, below Rs 5,240.66 crore in the corresponding 2025 quarter, even as reported cigarette revenue was higher by Rs 6,813.30 crore. Segment results are therefore a separate reported measure from the gross revenue line affected by excise-duty presentation.

At the company level, standalone profit before tax was Rs 5,481.75 crore in the September 2026 quarter, compared with Rs 6,847.35 crore a year earlier. Profit for the period was Rs 4,137.12 crore, versus Rs 5,175.70 crore, while earnings per ordinary share were Rs 3.30 against Rs 4.13. These figures include an exceptional expense of Rs 25.66 crore related to the acquisition of Century Pulp and Paper, whereas the year-earlier quarter included an Rs 88.08 crore exceptional gain from an insurance settlement.

For the six months ended 30 September 2026, ITC’s cigarette segment result was Rs 7,154.68 crore, compared with Rs 10,385.94 crore a year earlier. Company-wide profit before tax was Rs 10,241.16 crore, versus Rs 13,390.83 crore, and profit for the period was Rs 7,715.94 crore, versus Rs 10,086.43 crore. The filing does not attribute those profit movements solely to the excise change, so its disclosed tax explanation is confined to the presentation and comparability of gross revenue and excise duty.

Which other ITC segments changed in the September quarter?

ITC’s FMCG-Others revenue rose to Rs 6,967.17 crore in the September 2026 quarter from Rs 6,023.52 crore a year earlier, while its segment result increased to Rs 558.30 crore from Rs 436.85 crore. The company reported earnings before interest, taxes, depreciation and amortisation, or EBITDA, of Rs 722.86 crore for FMCG-Others, compared with Rs 593.45 crore in the September 2025 quarter; its segment results include significant business-development, brand-building and gestation costs.

Agri Business revenue was Rs 4,451.69 crore in the September quarter, compared with Rs 3,976.24 crore a year earlier, and its segment result was Rs 510.67 crore versus Rs 459.10 crore. Paperboards, Paper and Packaging revenue rose to Rs 3,015.85 crore from Rs 2,219.92 crore, with segment result increasing to Rs 281.93 crore from Rs 191.01 crore. ITC says this segment includes Century Pulp and Paper from 1 August 2026, making that segment’s results not comparable with previous periods.

ITC completed the acquisition of Aditya Birla Real Estate Limited’s pulp and paper business, operated as Century Pulp and Paper, on 1 August 2026 through a slump sale. The provisional fair values of acquired assets and liabilities have been recorded under Indian Accounting Standard 103, Business Combinations. Separately, ITC acquired an additional 13,445 equity shares of Sproutlife Foods Private Limited on 28 September 2026, making Sproutlife a wholly owned subsidiary.

Conclusion

ITC’s September 2026 disclosure shows that its Rs 15,536.13 crore cigarette revenue and Rs 28,152.21 crore gross product revenue cannot be compared mechanically with the September 2025 quarter. The expiry of the GST Compensation Cess and the resulting higher excise duty from 1 February 2026 lift both reported revenue and excise expense because excise duty, unlike GST and the cess, is included in gross revenue presentation.

The next disclosed matters to watch are the effect of the tax structure on subsequent comparable periods and the integration of acquired businesses. ITC has said Century Pulp and Paper has been included in the Paperboards, Paper and Packaging segment from 1 August 2026, while its board approved a proposed amalgamation of Sproutlife with ITC on 2 November 2026, subject to necessary approvals; no effect of that scheme has yet been included in the results.