GST reforms: FMCG distributors write to FM, flag supply-chain risks

Request for guidelines for smooth transition

The fast-moving consumer goods (FMCG) distributors’ association has written to Finance Minister Nirmala Sitharaman flagging potential supply-chain disruptions arising from changes in goods and services tax (GST) rates, and has requested clear guidelines to ensure a smooth transition.

 

Prime Minister Narendra Modi, in his Independence Day address, announced GST reforms, describing it as a Diwali gift to lower the tax burden on the common man.

 

According to reports, the 12 per cent GST slab is expected to be removed and these items will move to the 5 per cent category.

 

The All India Consumer Products Distributors Federation, in a letter reviewed by Business Standard, said this shift could have an impact on the stock that are already in trade.

 

Currently, packaged and processed foods such as butter, ghee, pickles, jams, nuts, soya milk, fruit juices, tooth powder, namkeens, savouries, chips, bhujiya, and other snack foods are taxed at 12 per cent.

 

In its letter, the association said: “Large volumes of goods are already present in the trade pipeline and at retail counters. Sudden rate changes, without directives, may affect margins, create disputes, and confuse consumers. We urge issuance of clear guidelines to manufacturers on pricing and stock adjustment.”

 

The federation said that while rate cuts are expected to benefit consumers, there is a risk that the benefits may not flow uniformly through the supply chain that could affect distributor and retailer margins.

 

It urged the ministry to issue clear directives so that neither trade nor consumers are adversely affected.

 

A company executive, speaking on condition of anonymity, said any increase or decrease in rates would ultimately be passed on to consumers. Companies will have to bear the burden of transition and adjust the delta accordingly, the executive added.

 

The association also flagged concerns over the transition of input tax credit (ITC) on closing stock, warning that distributors and retailers could face financial strain. “We request a proactive framework to ensure rightful credit of ITC so that trade partners are not unfairly burdened,” the letter said.

 

It said aerated beverages, currently placed in the highest GST slab, see higher consumption at lower price points of ₹10 and ₹20, mainly among lower-income groups. The association requested that these not be classified as “sin goods” as demand could then take a hit.