India's next-generation goods and services tax reforms, dubbed GST 2.0, is soon going to usher an era of renewed consumption starting from the festive season. The demand growth assumes significance amid global headwinds, especially the US tariffs. The GST rate cuts are also largely being seen as a boost to the country's near-term economic growth.
However, India's leading FMCG companies, such as Dabur, Amul, Emami, Britannia, among others, are sitting on a pile of stocks with printed MRP under the current GST regime, waiting to deal with their inventory lying at warehouses and shelves of retail stores across the country.
In the current scenario, Harsha Vardhan Agarwal, President FICCI, Vice Chairman & MD, Emami spoke to NDTV Profit in an exclusive interview on Sept. 12, and highlighted that the changing prices may not be viable for the small-priced and smaller-sized packs for FMCG companies. He also added that some sectors will take some time to pass on benefits to consumers
FICCI On FMCG Sector
Harsha Vardhan Agarwal of Emami told NDTV Profit that some FMCG companies may need be able to change the retail prices of the smaller sized items or packets in the market, despite GST rate cuts. "Changing the prices for smaller-priced packs is not viable for many. We may need to look at increasing the weight of smaller-sized packs to compensate for the existing prices," he said. He also added that consumer-driven companies may take some time to pass on the GST benefits to consumers.
GST 2.0 Impact On FMCG Sector
The industry players expect that shifting to a new GST regime with reduced duties on FMCG products will boost consumption. However, it will trigger a 'short-term disruption' due to existing stocks under the current tax regime.
GST reforms have lowered tax rates on 375 items across various sectors including auto, FMCG, apparel, textiles, etc. The GST Council, in its meeting on Sept. 3, approved a two-tier structure of 5% and 18%, with a special rate of 40% on the tobacco and related products as well as ultra-luxury items.
The new rates will be effective Sept. 22. Currently, GST is levied in the slabs of 5%, 12%, 18% and 28%. Fast-moving consumer goods (FMCG) products such as hair oil, soap, face powders, shampoos, toothbrushes, and toothpaste, along with all food items, have come under the lower slab of 5% from 18%. It has also reduced duty on room AC and TV above 32 inches to 18%.
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