16-18% Goods And Services Tax Rate Backed by FMCGs Parle And Godrej

Consumer goods firms are of the view that a standard goods and services tax(GST) rate of 17-18% can spur growth in the industry but warned that ease and simplicity of GST may get compromised if their categories are not clubbed in compatible slabs.

“As long as daily consumption and mass products fall under lower slabs, GST will be beneficial and spur growth, and is much needed,” Saugata Gupta, managing director at consumer staples firm Marico, said.

Industry experts said 17-18% GST would be positive for household and personal care segments as the effective tax rate would come down, apart from reducing warehousing and logistical requirements.

FMCG companies including Godrej and Parle backed the Goods and Services Tax (GST) rate bracket between 16% and 18%.

What This Could Mean For The FMCG Industry

“Our main concern is the tussle about different rates between central and state governments. We are also unsure on what are the exemptions. Yet, we feel that a 16-18% tax bracket would be positive for our industry,” said Mayank Shah, deputy marketing manager at biscuit maker Parle Products.

Godrej Consumer Products managing director Vivek Gambhir said the company is awaiting clarity on applicable GST and is yet to ascertain their impact on categories. “If the GST rate for FMCG is above 22%-23%, it could be inflationary and may further delay the recovery of the sector. Alternatively, a rate of around 18% would spur growth. Consumers would consequently benefit from the lower tax rates and we could witness an uptick in demand,” he said.

The second GST Council meeting failed to reach a consensus on the GST rate but decided on compensating states for any losses.

The next GST council meeting is scheduled for first week of November.