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The FMCG sector is preparing for a major GST change that will replace four tax slabs with two 5 % and 18 %. Products like hair oil, soap, shampoos, toothpaste, and packaged food items will now fall under the lower 5 % rate. While this is expected to improve demand, companies and distributors are left with large stocks carrying higher MRPs under the old structure. Industry leaders are asking the government to allow sales of such stock with discounts to prevent waste and manage costs. Clear guidelines are awaited for smooth transition.
FMCG companies are currently holding large inventories that display old MRPs under the current GST system. They're awaiting government guidance on how to handle this stock once the new GST structure simplified into two slabs of 5 % and 18 % comes into force. The industry anticipates that the change will boost consumption but warns of immediate supply chain friction because of existing stock pressures. Advertisement
Industry players believe that reduced duties will encourage consumption, but they also expect short-term disruption because products on shelves and in warehouses still carry higher MRPs. Many firms want the government to allow them to sell old stock with discounts rather than reprint labels, which would otherwise cause waste and add costs.
Emami Vice Chairman and Managing Director Harsha Vardhan Agarwal said that companies are currently evaluating possible steps and also waiting for government verification. He noted that challenges will differ across categories and stock levels, and companies are working on mitigation plans accordingly.
Godrej Consumer Products Managing Director and CEO Sudhir Sitapati mentioned that customers will start seeing reduced prices only by early or mid-next month, since it takes time for goods with new MRPs to reach stores. He described the immediate effect as temporary disruptions, as the industry operates on an MRP-based system and existing stock is still priced higher.
Parle Products Vice President Mayank Shah said that industry associations are already in discussions with the government. He pointed out that food products, which move faster but have shorter shelf life, and personal care items, which sell slower, will face different challenges during this shift.
Retail chain V-Mart has stated it will not alter MRPs on current stock but will pass on the benefit of lower tax in the form of discounts at billing. The company has updated its billing software and displayed signage in stores to inform customers.
Air conditioner maker Blue Star has already started updating MRPs on new stock. For older inventory with dealers, the company explained that they will have input tax credit at 28 % while selling to customers at 18 %, creating a 10 % excess credit. This will take three to four months to absorb, and the company has committed to compensating dealers for interest burden to ease working capital pressure.
Distributors, represented by industry federations, have also asked the government for clarity and mechanisms such as credit notes or compensation to avoid financial strain. They stressed that without proper rules, the burden would fall on distributors and small retailers handling large amounts of stock.
The GST Council has recently reduced tax rates on most common-use products to 5 % and shifted goods such as room air conditioners and televisions above 32 inches to the 18 % slab. The earlier structure had four slabs of 5 %, 12 %, 18 %, and 28 %. The Council also simplified compliance by removing the need to link credit notes to individual invoices, which will reduce paperwork for FMCG companies.
Source PTI
5th Jun, 2025
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