30th September, 2020

Indian bathroom and fridge to get popular items back after GST cut in FMCG

The middle-class refrigerator is going to get back its items soon.  

The prices of chocolates, nutrition drinks and condensed milk are going to drop by 5- 15% after the latest GST rate revision. As the GST Council removed 178 items from the higher tax slabs, companies like Hindustan Unilever, Dabur, Amul, GlaxoSmithKline, Procter & Gamble, Nestle and Perfetti Van Melle said they are planning to reduce the prices.

Would the prices reduce?

The GST Council cut tax on several consumer goods to 18% from 28%. And since the manufacturers are bound by the GST law that has an anti-profiteering clause, the manufacturers have to pass on any benefit from lower tax incidence to consumers.

Dabur has informed, that it will reduce price on its shampoo range by at least by 5%.  

Amul, which is also the country’s largest dairy firm, said it would slash prices of condensed milk and chocolates by 5-10% with immediate effect.

GlaxoSmithKline too has confirmed that it would reduce the price of its malt-drink Horlicks soon.

Hindustan Unilever said it is re-pricing Rin detergent and its skin creams.  

SK Tijarawala, a spokesperson for Patanjali, said the Ayurveda giant has already started the process to reduce prices, but there were multiple channels and processes to be undertaken before the new prices reach consumers.

What about the products on store’s shelf?

Negotiations between the FMCG majors and the retailers will take at least a week to reach a conclusion. The law makes it compulsory for the companies to pass on the benefits.

“Technically, the retailers have an option to either reduce the price right away or a bit later. However, since the law states that no one can profit from GST, the entire profit made from the date of reduction would eventually need to be passed on to customers,” said PwC India’s Jain.

 ‘Ghari’ detergent brand said it would offer “some kind of promotion” to ensure that the benefit of lower tax reached the consumer.

The companies may either opt for price cut or increase the weight (grammage) on existing prices that would equate price-cut automatically.