India's consumer giants drop prices as GST cuts take effect

In a major move to pass on tax benefits to consumers, India’s top consumer goods companies, including Hindustan Unilever (HUL), Procter & Gamble (P&G), and L’Oréal, are slashing prices on a range of household essentials. The price drops follow a decision by the GST Council to lower the Goods and Services Tax on numerous fast-moving consumer goods (FMCG), a change that becomes effective on September 22.

The GST rate cut will see the tax on items like shampoo, hair oil, and toothpaste fall from 18% to just 5%. Similarly, GST on butter, cheese, and pre-packaged snacks will drop from 12% to 5%. This revised tax structure is expected to make these everyday products more affordable for consumers, especially in the lead-up to the festive season.

Companies Offer Incentives to Clear Stock

To ensure a smooth transition and clear out existing inventory, FMCG majors are offering special incentives to their distribution and retail partners.

Hindustan Unilever has launched a "Retailer Bonanza" with significant trade offers on popular products. This includes a 20% discount on small and medium shampoo bottles, 11% on talc and face powders, and 8% on toothpaste brands like Pepsodent and Close Up.

Procter & Gamble announced a "GST Special Offer" providing an extra 10% top-up on products like Pantene and Head & Shoulders (moving from 18% to 5% GST), and a 5% top-up on Pampers and Vicks (moving from 12% to 5% GST).

L’Oréal India has also communicated the tax change to its trade partners, confirming that from September 22, the GST on shampoos and face powders will drop to 5%.

Retailers Reassured on Tax Credit

With the tax changes creating potential confusion over inventory purchased at the old rates, companies are reassuring retailers. Mankind Pharma and Himalaya Wellness Co. have both clarified that the input tax credit on stock purchased at higher GST rates will remain fully available to retailers. This means distributors and shopkeepers will not face any financial loss, allowing them to continue their regular purchasing routines and maintain stable inventory levels.

Dhairyashil Patil, president of the All India Consumer Products Distributors Federation (AICPDF), emphasized that the ultimate goal is to ensure these benefits are passed on to the end consumers, a sentiment echoed by the companies who are looking for higher sales during the upcoming festival season.