New Delhi, Sep 4 (PTI) The cut on GST rates on commonly used personal items and daily essential products in the run-up to the festival season will play a key role in domestic consumption revival, while stimulating economic momentum and building long-term growth in the FMCG sector, industry players said on Thursday.
Terming the decision of the GST Council, headed by Finance Minister Nirmala Sitharaman, to limit slabs to 5 per cent on consumer food products, effective from September 22, as "game changing", FMCG sector players said it will act as a catalyst for inclusive economic growth.
FMCG companies are looking forward to passing on the benefits of the GST rate cut to consumers by either increasing the grammage or reducing the prices of stock keeping units (SKUs), with industry analysts expecting a price drop of 8-10 per cent, depending on brands, while contributing to 2-3 per cent growth in the FMCG industry.
Marico MD & CEO Saugata Gupta said the GST rate cut is "game changing" and by making essential consumer products more affordable, especially in the run-up to the festival season, these reforms will play a pivotal role in stimulating economic momentum and building long-term growth in the FMCG sector.
"We believe this will further empower households, foster consumption-led growth, and act as a catalyst for inclusive economic growth," he said.
Similarly, Dabur CEO Mohit Malhotra said the GST cut is a "timely and transformative move" and a growth enabler for the FMCG sector.
"This reform not only makes everyday essentials like shampoos, soaps, and toothpastes more affordable for millions of households, but also signals a strong commitment to inclusive growth and domestic consumption revival. I believe this initiative will act as a powerful catalyst for demand, especially in rural and semi-urban markets," he said.
Leading FMCG company HUL termed the duty reduction as 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 the country's economic progress," said HUL CEO & MD Priya Nair.
Zydus Wellness CEO & Wholetime Director Tarun Arora said it lays the foundation for sustained consumer confidence by directly addressing inflationary pressures, making daily essentials more affordable, and increasing household disposable income.
Leading oral care maker Colgate-Palmolive India MD & CEO Prabha Narasimhan said: "This is a timely step that provides a boost to consumer confidence and creates an environment for businesses to innovate."
Godrej Consumer Products Ltd (GCPL) Chief Financial Officer Aasif Malbari said, "We welcome the government's initiative of lowering taxes to boost consumption. The move will ultimately contribute to overall economic momentum. We are fully committed to ensuring that the GST rates reduction benefits are passed on to consumers."
Welcoming the reduction in GST rates on FMCG items, distributors' association AICPDF said, "This is not just a technical tax adjustment -- it is a landmark step" that will boost consumption, ease pressures on trade, and strengthen the supply chain from manufacturers to the last-mile retailer of the industry, which is valued at Rs 6.5 lakh crore.
This will generate an estimated 8-10 per cent growth in rural consumption over the next two quarters, said All India Consumer Products Distributors' Federation (AICPDF).
It will also help improve distributor and retailer liquidity by an estimated Rs 4,000 to Rs 5,000 crore across the network due to reduced working capital blockages.
"Adding momentum to India's FMCG sector, which is projected to grow at 10-12 per cent annually, with this GST reform potentially accelerating it by another 2-3 percentage points," it said.
According to Grant Thornton Bharat Partner and Consumer Industry Leader Naveen Malpani, GST rate reductions have made a wide range of daily essentials more affordable, "which could lead to price drops of 8-10 per cent depending on brand and supply chain efficiencies".
Companies are expected to either increase grammage of sachets and popular price packs, besides reducing the rates of medium and large packs, making them more attractive, said industry executives.
The companies are also ready to implement the new prices on FMCG items, which are lying at warehouses currently, although they have no clarity on pricing over products that have a longer lifespan and have been with retailers for a longer period.
In recent weeks, FMCG demand had softened as consumers waited for clarity on GST rationalisation. With the new rates now in effect, retailers are expecting a strong rebound in festival sales.