GST rate cut: When will cheaper oil, soap, biscuits, chocolates be available?

After GST reforms, FMCG companies are worried about the stock with old MRP. They want guidelines from the government regarding the goods lying in the warehouses and shops after the new rates are implemented. The industry hopes that the government will allow the sale of the stock with old MRP with a discount as it may take time to deal with the fall in prices due to the new rates.

Companies manufacturing everyday use goods are confused about the stock with pre-printed MRP under the current GST system. They are waiting for GST implementation guidelines from the government to deal with their stock lying in their warehouses and retail shops across the country.

The industry believes that the implementation of the new GST system with low duty on daily use goods (FMCG) will increase consumption. However, this will cause 'interruption in the short term' due to the stock available under the current tax system. The industry hopes that the government will allow them to 'sell with a discount' the existing stock with old MRP despite the implementation of GST reforms from September 22.

What is the tension of FMCG companies

According to Harshvardhan Agarwal, Vice President and MD of Emami, at the moment, everyone is evaluating what needs to be done. He said, "Apart from this, we are also trying to get verification from the government in this matter. Of course, we will also see how quickly we can deal with the changes in MRP."

When asked about some FMCG companies seeking more time from the government to deal with the price drop, Agarwal, who is also the chairman of industry body FICCI, said that it would depend on product-by-product and stock level.

He said, "Challenges may vary for different companies. At this time, we are evaluating the current environment and challenges so that a plan can be prepared to deal with it."

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When will products with lower MRP be available?

Godrej Consumer MD and CEO Sudhir Sitapati said that consumers will get FMCG products at lower prices only by the beginning or middle of next month, as it takes time for goods with new MRP to reach the market.

Sitapati said that reducing the GST rate on FMCG to 5% has created 'some short-term hindrances' in the industry. This is because the FMCG sector runs on the MRP system and distributors and companies have stocks with higher MRPs.

He said, "The stock that distributors and FMCG companies have is of higher MRP. By giving money directly to businesses, the benefit does not reach the consumers immediately. It will take some time for the products with new MRP to reach the market."

Will it take more time for the new rates to be implemented?

The new rates of Goods and Services Tax (GST) will come into effect from September 22. However, Sitapati indicated that it may take more time to be implemented. He hoped that by the beginning or middle of next month, consumers will start seeing a drop in the prices of FMCG products.

Parle Products Vice President Mayank Shah said that the FMCG industry is waiting for the implementation guidelines. He said, "Industry bodies are already in talks with the government. Depending on the guidelines given, we will either have to take immediate action or some time may be given."

'Will not change MRP'

Regarding the existing stock, Shah said that different companies face different challenges. For example, food products have a shorter shelf life compared to personal care products. But their sales speed is higher. Challenges are different for every company. A lot will depend on the upcoming guidelines.

V-Mart has said that it will not make any changes in the MRP on the product labels of the existing stock. However, it will definitely give consumers a discount on the final bill. Lalit Agarwal, Chairman and MD of V-Mart Retail, said, "The benefit of the reduction in GST by the government will be passed on to the consumers in the form of discount on the final bill."

Tax rates reduced on 400 items

The GST Council decided to have two slabs instead of four slabs of GST. Now the tax rates will be five and 18 percent, while a special rate of 40 percent will be applicable on luxury items and harmful items like cigarettes.

The new tax rates will come into effect from September 22, except for cigarettes, tobacco and other related items. Under the rationalization of tax rates, rates have been reduced on about 400 items, including consumer goods like television and air conditioners, as well as food and everyday items.