The Goods and Services Tax on cigarettes dragged down ITC’s second-quarter net profit, the company said in its earnings report on Friday. ITC, which runs hotels and also sells personal care and home products, reported a net profit of Rs 2,639.84 in the July-September quarter, up only 5.6% from Rs 2,500.03 crore in the same period last year.

Although cigarette sales were “under severe pressure due to the sharp increase in tax incidence under the GST regime”, ITC’s revenue from consumer goods rose 10% year on year. Revenue from its hotel business rose marginally to Rs 300.18 crore from Rs 297.34 crore last year. ITC said the ban on the sale of liquor at hotels and restaurants close to highways had affected beverage sales.

ITC’s gross revenue from sales increased 3.9% to Rs 16,391.58 crore. Its operating profit – earnings before deductions such as interest and taxes – rose 3.6% in the September quarter.