India, Aug. 3 -- The government's steep increase in taxes on cigarettes and tobacco products has started weighing on the country's leading cigarette makers, with ITC, Godfrey Phillips India, and VST Industries reporting declines in net revenue, volumes and profitability in the April-June quarter, the first full quarter after the revised tax regime came into effect.

The three companies together account for more than 90 per cent of the domestic cigarette market, which, according to some reports, has an estimated annual volume of over 100-120 billion sticks.

Earlier in February this year, the government raised the goods and services tax (GST) on cigarettes and tobacco products to a flat 40 per cent. It replaced the compensation cess with a...