Indonesia Just Froze Its Tobacco Excise Tax for the First Time in Years. Here's What That Actually Did to Cigarette Stocks
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8 min read
If you own, or are watching, Gudang Garam (GGRM), HM Sampoerna (HMSP) or Wismilak (WIIM), you already know it has been a strange year. On 29 September 2025, Indonesia's government confirmed it would not raise the tobacco excise tax for 2026, the first time that had happened in years. The three stocks fell that same day anyway. Nine months later, when GGRM reported a 2,440% jump in profit, the stock fell again on the news. If a cost tailwind and a record profit both come with a falling share price, something more specific than "good news, stock goes up" is going on. Here is what actually happened, with the real numbers.
Indonesia's tobacco excise tax is called Cukai Hasil Tembakau (CHT), literally "excise on tobacco products." It is a tax the government charges per cigarette produced, on top of any sales tax, and it is set by tariff tier depending on the type of cigarette and the size of the manufacturer. For a company like GGRM or HMSP, CHT is usually its single biggest cost line, larger than tobacco leaves, paper or labor combined. When the government raises the CHT rate, cigarette makers either raise retail prices to cover it, which risks losing price-sensitive smokers to cheaper or illegal cigarettes, or absorb the cost and let it eat into profit margin (the share of revenue left over after costs, expressed as a percentage). Either way, the CHT rate is one of the single most direct policy levers acting on these companies' earnings, which is why the market watches every year's announcement closely.
Here is the CHT tariff change for every year since 2020, compiled from Indonesian Ministry of Finance policy announcements as reported by CNBC Indonesia and Kontan:
| Year | CHT tariff change |
|---|---|
| 2020 | +23% |
| 2021 | +12.5% |
| 2022 | +12% |
| 2023 | +10% |
| 2024 | +10% |
| 2025 | 0% (frozen) |
| 2026 | 0% (frozen) |
That is six straight years of increases, some of them steep, followed by two straight years of no change at all. Then-Finance Minister Purbaya Yudhi Sadewa confirmed the 2026 freeze on 29 September 2025, citing pressure on consumer purchasing power and the risk that a higher legal price pushes more smokers toward illegal, untaxed cigarettes, per Bisnis.com.
A frozen excise rate is, on paper, good news for a cigarette maker's costs. That is not what happened to the share price. On 29 September 2025, the day Minister Purbaya's decision was confirmed, all three IDX-listed cigarette makers dropped:
| Stock | Move that day | Closing price |
|---|---|---|
| WIIM (Wismilak) | -6.84% | Rp1,430 |
| GGRM (Gudang Garam) | -4.27% | Rp14,000 |
| HMSP (HM Sampoerna) | -4.00% | Rp840 |
(Figures per Bisnis.com.)
The likely explanation is what traders call "sell the news": the stocks had already rallied in the days before, on early signals the increase would be small, per an earlier Bisnis.com report. By the time the freeze was officially confirmed, that expectation was already priced into the share price, so the actual announcement left traders with less reason to keep buying and more reason to lock in gains. The lesson is not that the freeze was bad for these companies. It is that a stock price reacts to whether news beats what was already expected, not to whether the news itself is good.
Nine to ten months into the freeze, first-half 2026 results are in, and the earnings impact is real, even if the stock reaction on any single day was not straightforward. "YoY" below means year on year, comparing the same period a year apart.
| Company | Period | Net profit | YoY change | What actually drove it |
|---|---|---|---|---|
| GGRM | H1 2026 | Rp2.98 trillion | +2,440% (from Rp117.16 billion) | Cost of goods sold cut from Rp40.58 trillion to Rp35.19 trillion; operating expenses cut 33.92%, alongside a reported 23.5% reduction in workforce |
| HMSP | H1 2026 | Rp4.2 trillion | +97% | Sales volume recovery (roughly 20 billion sticks in Q2, +9% quarter on quarter) plus raw-material cost efficiency, lifting gross profit margin to 18.4% |
| WIIM | H1 2026 | Rp303.32 billion | +104.6% | Actual sales growth: net sales up 12.3% to Rp3.23 trillion, led by machine-made kretek cigarettes rising from Rp1.74 trillion to Rp2.15 trillion |
(GGRM: Kontan, idnfinancials. HMSP: dataindonesia.id and subsequent H1 2026 reporting. WIIM: Bisnis.com, idnfinancials.)
Notice these are three different stories under the same tailwind. GGRM's jump was overwhelmingly a cost story, including a large workforce cut, off a very weak year-ago base. HMSP's was a mix of volume recovery and cost efficiency. WIIM's was the closest to the textbook version: cigarettes actually sold more. A frozen excise tax made all three easier, but it did not make them succeed the same way, and a headline profit percentage on its own does not tell you which of the three you are looking at.
GGRM's 2,440% profit jump was reported around 12 August 2026. The stock's reaction was to fall 4.59% that day, to Rp19,725, per CNBC Indonesia. Investors were reportedly focused on what was underneath the profit number: revenue still fell 7.2% year on year, meaning GGRM sold less, and a profit built mainly on cost cuts and a shrinking workforce raises a real question of whether that growth rate can repeat once there is nothing left to cut.
On 14 September 2026, less than two weeks before this article, President Prabowo Subianto swore in Suahasil Nazara as the new Finance Minister, replacing Purbaya Yudhi Sadewa. Cigarette stocks fell again on the reshuffle news, as investors weighed the risk that a new minister could reopen the excise question for 2027, per IDX Channel. Analysts at CGS International, however, currently project the 2027 CHT rate will also stay unchanged, in line with the assumption already built into 2027 state budget discussions, per Finansial Insight. As of 21 September 2026, GGRM traded at Rp17,650 and HMSP at Rp645, both still recording modest net foreign buying that day, per Bisnis.com and contemporaneous market reporting.
Indonesia's tobacco excise tax broke a six-year streak of near-annual increases, and that break is a real, measurable cost benefit that shows up in GGRM, HMSP and WIIM's actual 2026 results. But every time that story hit the market this year, the stocks moved on something more specific than the headline: what was already priced in, what was really driving the profit number underneath, and who might be setting next year's policy. Before treating a cukai headline as a reason to expect a cigarette stock to move a certain way, check what else has already been priced in and what a company's own numbers actually show. NetWort's Market page tracks daily IDX sentiment and sector movers, so you can see how a stock is actually trading before assuming a policy headline explains it. For a similar case of a macro story moving consumer stocks for reasons other than the obvious one, see Indonesia's minimum wage went up in 2026, here's what it actually did to consumer stocks.