FMCG sector set to gain as soaps, noodles, shampoo shift to 5% GST slab

The GST Council has moved several FMCG items to the 5% slab and exempted breads, paneer and milk, a move expected to lower prices, spur consumption and aid festive demand

Don't want to miss the best from Business Standard?

The new goods and services tax (GST) regime, with 5 per cent and 18 per cent slabs, will provide relief to the fast-moving consumer goods (FMCG) sector.

 

Everyday items such as soaps, toothbrushes, hair oil, namkeen, instant noodles, chocolates and instant coffee will now attract 5 per cent GST. Breads, paneer and ultra-high temperature processed milk will have nil GST.

 

“This is going to have a positive impact on the economy,” said finance minister Nirmala Sitharaman.

 

Consumer companies have welcomed the move. 

 

"The move is expected to make these commonly consumed items more affordable, benefiting end consumers, particularly in price-sensitive rural and semi-urban areas," said Devendra Shah, chairman, Parag Milk Foods, adding that the move will also help farmers have better income stability. 

 

"The lower tax burden could help increase consumption of branded and quality-assured dairy products, potentially encouraging a shift away from unregulated or adulterated alternatives," Shah added. 

 

Dairy products like ghee, butter, cheese from the 12 per cent slab to 5 per cent slab.   

 

“We welcome the recent GST reforms announced by the Government. As part of the snacks industry, we generally maintain a limited finished goods inventory of 2–4 days. We are closely reviewing the overall impact of these reforms on input and output taxes, and will take a considered decision on price reductions for our family pack namkeens by the end of this month," said Rishabh Jain, chief financial officer at Bikaji Foods International.

 

Ethnic snacks like namkeens, bhujia, mixture and similar edible preparations ready for consumption form have moved from the 12 per cent slab to the 5 per cent slab.  

“The decision to bring almost all FMCG products under the 5 per cent GST slab is commendable. This rationalisation will directly reduce prices, make essential goods more affordable for consumers, and drive higher consumption, thereby benefiting every household in India,” said Dhairyashil Patil, national president, All India Consumer Products Distributors Federation (AICPDF).

 

The move is expected to add momentum to the FMCG sector, accelerating it by 2–3 percentage points, said the body, which represents more than 450,000 distributors and 13 million kirana retailers across the country.

 

“We extend our deep gratitude to the finance minister for making this reform a reality and for looking into the FMCG sector with the seriousness it truly deserves. This is not just a technical tax adjustment — it is a landmark step that will boost consumption, ease pressures on trade and strengthen the supply chain from manufacturers to the last-mile retailer,” AICPDF said in a note.

 

The distributors’ body added that with the reform effective from September 22, traders have ample time to manage inventory smoothly and prevent disruption.

 

In an earlier conversation with Business Standard, Jayen Mehta, managing director at Amul, had said the rationalisation reforms would go a long way in spurring consumption.

 

“Products like ghee, butter and cheese are currently taxed at 12 per cent, while ice cream is taxed at 18 per cent. If GST on these products comes down to 5 per cent, it will be a big boon as retail prices will reflect the reduced taxation. Increased consumption will also power double-digit growth for Amul, ensuring a strong festival season,” he said.

 

Dabur’s chief executive officer, Mohit Malhotra, also said the move would put purchasing power back in the hands of the consumer.

 

“As the festival season approaches, this will help improve sentiment and put more purchasing power directly into the hands of millions of Indian families. This is more than just a policy shift; it is a signal of confidence in India’s consumption story. It will energise demand, especially in rural and semi-urban markets, ease the burden on households and catalyse growth for branded FMCG products,” Malhotra said.

 

Subdued demand trends, especially in urban areas, coupled with inflation have dragged down volumes of FMCG companies in recent quarters.