GST Rejig: FMCG Firms Say Can’t Cut Rates On Rs 5, 10, 20 Packs, May Increase Sizes Instead | Economy News

The FMCG companies propose to increase grammage in impulse packs — low-ticket items often purchased on the spur of the moment — to pass on GST benefits fully to consumers.

FMCG companies are reluctant to cut prices on small packs, such as Rs 5, Rs 10 or Rs 20, despite GST cuts even as they say these price structures suit consumer habits. Instead, the companies propose to increase pack sizes by increasing the quantity, while keeping popular price points unchanged, according to a Moneycontrol report.

Industry executives explained that products sold at Rs 5, Rs 10 and Rs 20 dominate consumer buying habits, and lowering MRPs below these thresholds could disrupt demand. For example, a biscuit pack priced at Rs 20 included 18% GST earlier. With the GST reduced to 5% from September 22, the price would fall to about Rs 18. But, companies say that figure does not fit with Indian shoppers’ preference for rounded-off price bands.

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

“What we can do, is increase the volume of the packaged item proportionally, while keeping the price the same. Meaning, the size of the Rs 20 pack of a biscuit would increase,” another company executive said, according to the report.

According to Moneycontrol, Rishabh Jain, CFO of Bikaji Foods International, confirmed that the company would increase grammage in impulse packs — low-ticket items often purchased on the spur of the moment — to pass on GST benefits fully to consumers.

On September 3, the GST Council, chaired by Sitharaman, in its 56th meeting slashed rates on several items ranging from daily-use products like shampoo and hair oil to automobiles and televisions. The council also simplified the structure to three slabs — 5%, 18% and 40%.

UHT milk, paneer, khakhra, pizza bread, roti and parathas have been exempted from GST altogether. Butter, ghee, cheese, condensed milk, jams, sauces, soups, pasta, namkeens and confectionery items will now be taxed at just 5%, down from 12-18%. Dry fruits such as almonds, cashews, pistachios, dates, figs and citrus fruits have also seen levies cut to 5%.

HUL Cuts Prices

Hindustan Unilever Ltd (HUL) has reduced prices across some of its most popular products, including Kissan Jam, Horlicks, Lux soap and Dove shampoo, with the new rates coming into effect from September 22, according to a newspaper advertisement.

The company has announced that a 340-ml Dove shampoo bottle will now retail at Rs 435, compared with Rs 490 earlier. The price of a pack of four 75 gm Lifebuoy soaps has been reduced to Rs 60 from Rs 68. Apart from this, the price on a 200-gm jar of Horlicks has been cut to Rs 110 from Rs 130, while 200 gm of Kissan Jam will cost Rs 80, down from Rs 90.

Apart from this, automobile manufacturers have also cut prices across cars and bikes following GST cuts.