Improved consumer demand and an exceptional gain on account of Tamil Nadu entry tax write-back saw diversified conglomerate, ITC Ltd, report a near 17 per cent jump in net profit to Rs 3,090 crore for the October to December quarter of this fiscal. Net profit in the year-ago period stood at Rs 2,647 crore.

Exceptional gain of Rs 413 crore (Rs 270 crore post-tax) in respect of Tamil Nadu entry tax was written back during the current quarter based on a favourable order of the Supreme Court, which led to a boost in the bottom line.

In fact, the company also reported an over 6 per cent increase in sales in the December quarter, pointing to a gradual revival of demand for the Indian economy that witnessed major structural reforms since late 2016. The comparable gross sales value (net of rebates/ discounts) stood at Rs 16,746 crore for Q3FY18, as against Rs 15,747 crore in Q3FY16.

Gross revenues – which stood at Rs 9,853 crore for the period under review – are not comparable with the year-ago-period following a change in accounting structure. Revenues are now net of GST, while earlier it was gross of excise.

The November 2016 demonetisation and 2017 rollout of GST had upended consumption and stocking patterns. “The FMCG industry witnessed progressive recovery during the quarter from the transitional impact of GST rollout,” ITC said in a statement.

Cigarettes under pressure

For Q3 FY17 cigarettes reported a revenue of Rs 4,629 crore and a profit before tax of Rs 3,269 crore. Cigarettes remained the single largest contributor towards gross revenues (47 per cent) and accounted for nearly 71 per cent of the company’s profit before tax.

According to ITC, cigarette industry volumes remained under severe pressure due to a sharp increase in tax incidence and intense regulatory pressures. The combined impact of increase in excise duty announced by the Union Budget 2017 and the revision in GST Compensation Cess as stated resulted in an incremental tax burden of over 20 per cent on ITC, the country’s largest cigarette-maker.

“It is pertinent to note that the cumulative growth in tax incidence on cigarettes, after cognising for the latest increase in cess rates, stands at a staggering 202 per cent since 2011-12, i.e. the last six years,” the company said, adding that an estimated 68 per cent of the tobacco consumed in the country remains outside the tax net on account of evasion.