Taxman keeping eye on FMCG firms to ensure GST rate cut is passed on

With the Goods and Services Tax rate on over 200 items, the government and FMCG companies are working to ensure that the benefit is passed on to consumers in terms of lower maximum retail prices.

To this effect, Vanaja N Sarna, Chairperson, Central Board of Excise and Customs, has also written a letter to all the major FMCG companies pointing out the need to immediately revise the maximum retail prices on all the products in which reduction of GST.

“The benefit of reduction in the GST rate has to be passed on by the suppliers to the consumers by way of commensurate reduction in prices,” said the Finance Ministry statement on Monday, adding that it is also expected to encourage domestic demand and investment.

Earlier, Finance Minister Arun Jaitley and Finance Secretary Hasmukh Adhia had also stressed that the lower GST rates must translate into lower prices for consumers.

The GST Council in its meeting on November 10 at Guwahati had reduced the GST rate on nearly 200 items from 28 per cent to 18 per cent, 18 per cent to 12 per cent and, 12 per cent to five per cent.

Last week, the Union Cabinet also approved the setting up of the National Anti Profiteering Authority to ensure that the benefits of the reduction in GST rates on goods or services are passed on to the ultimate consumers by way of a reduction in prices.

FMCG companies have urged suppliers and retailers to ensure that the benefits of the reduced pricing is passed on to consumers on existing stocks , as it may take 3-4 weeks for fresh stocks with revised prices to hit the shelves.

Vivek Karve, Chief Financial Officer, Marico Ltd, said in order to pass on the tax benefits to consumers, Marico has effected MRP reductions on products across categories such as deodorants, hair gels, hair creams, body care etc.

“While the new production shifts to new reduced MRP immediately, we are passing on the benefits on existing stocks either through stickering the products with reduced MRP or by providing additional discounts to our trade channel partners. We have also sent out a communication to them to pass on the benefit of reduced taxes to the consumers,” he added.

Added Lalit Malik, Chief Financial Officer, Dabur India, “ In accordance with the GST laws , we have last week communicated to all our business and trade associates directing them to start charging the revised lower GST rates, wherever applicable, on all existing inventory. We have also directed them to pass on the GST benefit to the end consumer. Fresh production with the revised MRPs will hit the shelves by next month.”

A spokesperson for ITC said, “ITC has modified the price of its relevant products keeping in mind the applicable rates under the recent GST notification.”

Analysts said that for products where the tax slab changes do not have a significant impact, other strategies such as increasing grammage or weight of the products for the same price is also being looked at by FMCG companies.

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