GST rate rejig awakens the ghost of 2017 transition for FMCG players

Firms warn of teething troubles, seek time to rework SKUs and labels

Companies may be celebrating the long-term gains from the goods and services tax (GST) cut on a wide range of fast-moving consumer goods (FMCG) from toothpaste and shampoos to namkeens, but the industry is also gripped by memories of the chaos that followed GST’s rollout in 2017. Back then, stocks in the supply chain carried old price tags, triggering a near wipeout of sales for almost a month. 

Late Wednesday night, the government announced GST reductions across food and non-food categories in an attempt to encourage consumer spending. 

Executives insist the tax savings will be passed on to consumers, yet they worry about existing stock already with retailers and distributors. 

One company executive said distributors had slowed purchases since August 15, after Prime Minister Narendra Modi hinted at purchasing power-nudging measures and possible GST cuts. “Now that the new GST rates and implementation date are clear, distributors are restricting themselves to need-based inventory,” the executive added. 

Distributors typically hold inventory for 15–20 days. Another senior executive explained that packaging and stocking decisions are made two to three months in advance, complicating the transition. “With the new GST rates coming in, I face the challenge of dealing with the inventory already lying with us,” he said. 

The executive further said that smaller stock-keeping unit (SKU) packs priced at ₹5, ₹10, ₹15, and ₹20 will be tricky, since these price points cannot change. Companies will have to increase grammage and alter packaging instead. For larger SKUs, usually priced at ₹100 and above, reducing prices is easier. 

Industry representatives also want clarity on whether they can use stickers to display revised maximum retail prices until new stock reaches the shelves. 

Executives from multiple firms said the industry plans to make a formal representation to the government highlighting transition difficulties and suggesting solutions. A road map is expected next week. 

Mother Dairy confirmed it is awaiting guidance. "We expect a roadmap in the next few days on the transition; see if we can use stickers during the transition period from one GST slab to the other. There will be teething issues during the transition, but we will manage,” said Manish Bandlish, managing director of Mother Dairy.  

FMCG cos to offer more grammage on smaller packs

 

In the light of the goods and services tax (GST) reforms announced by the Finance Minister Nirmala Sitharaman on Wednesday, executives at FMCG companies will cut prices and also reduce grammage. 

Everyday items such as soaps, toothbrushes, hair oil, namkeen, instant noodles, chocolates and instant coffee will now attract 5 per cent GST. Meanwhile, Indian breads, paneer, and ultra-high temperature processed milk will cease to attract any GST. 

In a bid to pass on these benefits to customers, firms are looking to hike grammage in smaller packs, while reducing prices of larger packs. “The GST rate rationalisation announced is a positive and progressive step for the Indian economy. We will pass on the benefit of this rate rationalisation to consumers,” said HUL CEO & MD Priya Nair.