FMCG companies to benefit as GST slashed to 5% on key daily essentials

GST on FMCG items including soaps, shampoos, biscuits, jams and noodles has been reduced to 5% from 18%, a move expected to spur rural demand and improve liquidity

The goods and services tax (GST) rate on many fast-moving consumer goods (FMCG) items — including soaps, shampoos, toothpastes, jams, and noodles — has been reduced from 18 per cent to 5 per cent.

 

In its report on the new GST structure, Nomura said, “The GST Council has also brought down GST rates for a number of staples and essential categories from 18 per cent to 5 per cent, which is a meaningful reduction. It will bring relief to stressed consumption, aid volume growth, and drive formalisation, given that many categories in India still have a notable share from unorganised, local, and regional players.”

 

 

The new GST rates will take effect from September 22.

 

According to Nomura, the key beneficiaries of the rate cut include Colgate-Palmolive (India), which has seen its entire portfolio move from 18 per cent to 5 per cent.

 

Britannia Industries also stands to gain, with 85 per cent of its sales — primarily biscuits and cakes — falling under the lower 5 per cent slab.

 

Hindustan Unilever (HUL) will also benefit, with 40 per cent of its portfolio expected to see reductions.

 

For Dabur India, 50 per cent of consolidated sales qualify for the lower rate: 28 per cent comes from toothpastes, shampoos, hair oils, and glucose (all now at 5 per cent, down from 18), and another 25 per cent from juices, digestives, ethicals, and tooth powder (down to 5 per cent from 12). 

 

“The GST rate rationalisation announced in the 56th GST Council meeting is a positive and progressive step for the Indian economy. We thank the government for this welcome change, which simplifies tax structures, enhances accessibility for consumers, and will boost consumption, leading to economic progress. At HUL, we remain committed to providing superior value to our consumers, and we will pass on the benefit of this rate rationalisation to them,” said Priya Nair, chief executive officer (CEO) and managing director (MD) of HUL.

 

Calling it “a timely and transformative move”, Dabur India CEO Mohit Malhotra said, “The GST cut will energise consumer sentiment just as India steps into its festival season. It’s a confidence booster for consumers and a growth enabler for the FMCG sector. Essentials like soap, shampoo, and toothpaste are now more affordable for millions of households. This initiative will act as a catalyst for demand, especially in rural and semi-urban markets, allowing families to prioritise health and hygiene without compromising on quality.”

 

Nomura’s report also noted, “Quite a few categories in India have a notable share from unorganised/local/regional players. This should entice consumers to shift to better products and is a long-term positive for organised companies.”

 

Manish Bandlish, MD of Mother Dairy, welcomed the reduction of GST on paneer, cheese, ghee, butter, ultra-high-temperature (UHT) milk, milk-based beverages, and ice cream.

 

“This progressive step will enhance the affordability and accessibility of value-added dairy products nationwide. It is a major boost for packaged categories, which are increasingly popular in Indian homes. As one of the country’s leading dairy organisations, we remain committed to ensuring the benefits are passed on to consumers,” Bandlish said.

 

He added, “By lowering tax slabs, the move will encourage wider adoption of packaged dairy, strengthen consumer preference for safe and quality offerings, and allow more families to enjoy wholesome dairy products at better value. At the same time, it will create stronger market opportunities for farmers and energise the dairy industry as a whole.”

 

Marico MD and CEO Saugata Gupta called the reforms a “giant leap towards accelerating consumption and strengthening the vision of Aatmanirbhar Bharat”.

 

“The next-generation GST reforms announced by the government will drive India towards a consumer-friendly economy,” he added.

 

He said, “By making essential products more affordable — especially ahead of the festival season — these reforms will stimulate economic momentum and build long-term growth in FMCG. They will empower households, foster consumption-led growth, and act as a catalyst for inclusive progress.”

 

“Here’s to nurturing India’s consumption story with game-changing reforms that deliver for Bharat,” added Gupta.

 

The All India Consumer Products Distributors Federation (AICPDF) projected that the new rates would generate 8–10 per cent rural consumption growth over the next two quarters. It also expects improved distribution and retailer liquidity of ₹4,000–5,000 crore due to lower working capital blockages.

 

“This GST reform is a game-changer for the FMCG trade. It has brought long-awaited relief to 450,000 distributors and 13 million retailers — the backbone of India’s consumer economy. We thank the Prime Minister and finance minister for their visionary leadership,” said Dhairyashil Patil, AICPDF’s national president. 

 

Patil added that giving time until September 22 for pipeline stock liquidation shows “extraordinary sensitivity towards trade”, while bringing nearly all FMCG goods into the 5 per cent slab will “make products more affordable, boost demand, and energise the sector’s contribution to India’s growth story”.

 

Manoj Mishra, partner and tax controversy management leader at Grant Thornton Bharat LLP, said this round of rationalisation has “stepped right into the Indian kitchen”.

 

“A wide range of essentials — milk, paneer, butter, cheese, sauces, jams, namkeens, biscuits, breads, juices, coffee, tea, chocolates, confectionery, and dry fruits — are now in the 5 per cent slab. By bringing UHT milk, rotis, khakhras, and parathas to a nil rate, the Council has ensured that daily staples are no longer weighed down by tax,” he said.

 

He added that reductions on personal care and hygiene staples — soaps, shampoos, toothpastes, and detergents — are equally impactful, having shifted from 18 per cent to 5 per cent.

 

“Together, these changes ease the inflation pinch for households and the middle class while creating room for higher volumes and wider product penetration. Disposable income is freed up, while FMCG companies — particularly micro, small and medium enterprises and regional players — gain demand visibility and pricing flexibility. This is GST acting as a macroeconomic enabler: stimulating consumption, expanding rural demand, and aligning tax policy with inclusivity,” Mishra said.