Nestle India expects dip in sales growth on account of GST

Nestle India reported an increase of 9.66% t in net profit to Rs 263.43 crore for the second quarter

FMCG major Nestle India expects its "registered sales" growth to be impacted till June next year on account of GST.

However, sales volume will not be impacted as much, the company said in a investors presentation.

"The expected registered sales would be lower. That is because the excise duty has been now subsumed in the GST so the sales line will take a number hit," said Nestle India CMD Suresh Narayanan.

The company said the excise duty has got subsumed in the GST rate post July 1 and will be netted from the sales, which will be higher than the pre-GST regime.

"The domestic growth rate will be adversely impacted till June 18, till the time the base becomes comparable," said Nestle India Chief Financial Officer Shobinder Duggal.

In the pre-GST regime, sales were registered gross of excise duty and excise duty used to be a separate cost line and the VAT which was paid on sales was netted from sales, the FMCG company said.

"What is going to happen when we go to post GST is that we all know the excise duty has got subsumed in the GST rate and GST like VAT will be netted from sales," he added.

The range of the GST rates for each of the company's categories is between 5 per cent and 28 per cent for milk and nutrition products.

According to Duggal: "Volumes do not change, but value growth and to a certain extent, the real internal growth will also change especially for products which are being launched".

Prepared dishes and cooking aids are taxed between 5 per cent to 18 per cent while chocolate and confectionery are between 18 per cent to 28 per cent in the GST regime.

In the case of beverages, GST rates range between 12 per cent to 28 per cent.

Nestle India reported an increase of 9.66 per cent in net profit to Rs 263.43 crore for the second quarter ended June 30, 2017.

The company, which follows January-December period as a financial year, had posted 7.29 per cent increase in net sales to Rs 2,469.06 crore.