GST rate cut: FMCG firms slash product prices

Products whose GST rate was rationalised to 18% included chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoos, etc

Consumer goods companies have begun reducing product prices following a directive by the government on Monday to pass on the benefits of lower goods and services tax (GST) to consumers quickly or face action. 

Ghaziabad-based Dabur India on Tuesday slashed prices by 9 per cent on existing stocks of shampoos, skincare and home-care products.

“The company is passing on the benefits by providing primary discount of 9 per cent on existing stocks to its trade partners,” Lalit Malik, Dabur India’s chief financial officer, said in a statement. 

Mumbai-headquartered Procter & Gamble, meanwhile, announced price-offs on leading brands Tide, Ariel, Pantene, Head & Shoulders, Olay, Oral-B and Gillette, as the government and the Central Board of Excise and Customs (CBEC) nudged companies to move quickly on price cuts.

“We have made provisions for companies to claim the difference from the government as input tax credit. I am not willing to accept their argument to postpone passing on the benefits to consumers till they have disposed of their old stocks,” Revenue Secretary Hasmukh Adhia said in an interview on Monday.

Adhia’s comments had come following complaints that the latest GST rate cut wasn’t passed appropriately to consumers. On November 10, the government had slashed GST on 177 mass-use items, from 28 per cent to 18 per cent, leaving only 50 items in the highest tax bracket.

Products whose GST rate was rationalised to 18 per cent included chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoos, deodorants, air freshners, washing powder and detergents, among others. 

These products joined daily-use items such as soaps, toothpastes and hair oils, whose rate was 18 per cent from the start of the tax regime in July.

The CBEC had written to 100 major companies on Tuesday, including Colgate, Nestlé and Hindustan Unilever, to lower prices, implying these companies could act fast in the coming days. HUL has already been running ads in dailies announcing a steep cut of nearly 24 per cent on liquid detergents under Surf Excel Matic.

The country’s largest consumer goods company was the first to pass on the benefit of lower GST in categories such as soaps and toothpastes on July 1, announcing it with ads across dailies. 

In a conversation with Business Standard last week, Godrej Group Chairman Adi Godrej said his firm Godrej Consumer, the maker of brands such as Good Knight and Cinthol, would pass on the benefits in categories such as hair colour, air freshners and liquid detergents to users shortly. The company had slashed soap prices by up to 6-8 per cent in July.

The Business Standard, New Delhi, 22nd November, 2017