FMCG firms unlikely to cut MRPs of low-value goods despite GST rate slash. Here’s why

Fast-moving consumer goods (FMCG) companies in India are unlikely to directly pass on cuts in Goods and Services Tax (GST) rates to the maximum retail prices (MRP) of low-value packaged items, Moneycontrol reported on Friday, citing people familiar with the matter.

Manufacturers of everyday goods such as biscuits, soaps and toothpaste, typically sold at fixed price points of ₹5, ₹10 and ₹20, may not reduce MRPs in line with the new tax structure as it could disrupt consumer pricing habits, the report said.

For example, a ₹20 pack of biscuits currently priced with 18% GST would drop to around ₹18 after the tax is cut to 5% from September 22.

“Rupees 18 is not a price which we want to have for daily-use items. The Indian consumer is used to demanding products of the price band – ₹5, ₹10, and ₹20. We don’t want to disturb this structure,” Moneycontrol quoted a senior FMCG executive as saying.

Companies reportedly plan to maintain existing price points while increasing product volumes.

Bikaji Foods International CFO Rishabh Jain said the company would raise grammage in so-called “impulse packs” to fully pass on GST benefits to consumers.

In a letter to Principal Chief Commissioners of CGST zones, the ministry said the first report on the comparative details of Maximum Retail Price (MRP) of these commodities brand-wise will have to be submitted to the Central Board of Indirect Taxes and Customs (CBIC) by September 30.

The monthly report on pre- and post-September 22 MRP will have to be submitted to the CBIC by the 20th of every month for the next six months, said the letter dated September 9.

The list of 54 items includes cement, shampoo, toothpaste, tomato ketchup, jams, ice cream, AC, TV, all diagnostic kits, glucometer, bandages, erasers, and crayons, among others.

The GST Council on September 3 approved rate cuts on 375 items and moved to a two-tier tax structure of 5% and 18%, replacing the earlier four slabs of 5%, 12%, 18% and 28%. The revised rates will take effect on September 22.