Fast moving consumer goods (FMCG) are the products bought by consumers in small quantities as per the needs of the individual or the family. They have a quick turnover and so are sold within a year. The cost of producing such products is low, thereby making them low priced products. The competition in this sector is generally on price basis but product differentiation gives an added advantage to the FMCG companies to appeal the consumers to come and buy the product.
This sector can broadly be categorized into Personal care & Household care, Healthcare & Food and beverages.
- Personal care includes hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants, perfumes, feminine hygiene, paper products.
- Household care includes fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish).
- Healthcare includes OTC products & ethicals.
- Food & Beverages includes health beverages, staples/cereals, bakery products, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits and vegetables, dairy products, and branded flour.
Taxation of Education Sector under GST Regime
The Fast moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy. According to the India Brand Equity Foundation the sector has grown from US$ 31.6 billion in 2011 to US$ 52.75 billion in 2017-18. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 27.86 per cent to reach US$ 103.7 billion by 2020. So, GST which is a single tax regime introduced in the year 2017, is definitely having a huge impact on this industry. Before the implementation of GST in India, most of the FMCG products were taxed at rates ranging from 22 to 24 percent. But following are the latest GST rates applicable to the products of this industry:
GST rates on Personal Care Products
Description |
Rates |
| · Hair oil
· Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap · Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen or sun tan preparations; manicure or pedicure preparations [other than kajal, Kumkum, Bindi, Sindur, Alta] · Pre-shave, shaving or after-shave preparations · Personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or toilet preparations, not elsewhere specified or included; prepared room deodorisers, whether or not perfumed or having disinfectant properties; such as Pre-shave, shaving or after-shave Preparations, Shaving cream, Personal deodorants and antiperspirants |
18% |
| · All goods, i.e. preparations for use on the hair such as Shampoos; Preparations for permanent waving or straightening; Hair lacquers; Brilliantines (spirituous); Hair cream, Hair dyes (natural, herbal or synthetic) [other than Hair oil] | 18% |
GST rates on Household Care Products
Description |
Rates |
| · Toilet or facial tissue stock, towel or napkin stock and similar paper of a kind used for household or sanitary purposes, cellulose wadding and webs of cellulose fibres, whether or not creped, crinkled, embossed, perforated, surface-coloured, surface-decorated or printed, in rolls or sheets
· Polishes and creams, for footwear, furniture, floors, coachwork, glass or metal, scouring pastes and powders and similar preparations (whether or not in the form of paper, wadding, felt, nonwovens, cellular plastics or cellular rubber, impregnated, coated or covered with such preparations) · Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap; paper, wadding, felt and nonwovens, impregnated, coated or covered with soap or detergent · Organic surface-active agents (other than soap); surface-active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations |
`18% |
GST rates on Health Care Products
Description |
Rates |
| · Other Drugs and medicines intended for personal use | 12% |
| · Preparations for oral or dental hygiene, including and powders; yarn used to clean between the teeth (dental floss), in individual retail packages [other than dentifrices in powder or paste from (tooth powder or toothpaste)] | 18% |
GST rates on Food and Beverages
Description |
Rates |
| · Meat, Fish
· Fresh milk and pasteurised milk, including separated milk, milk and cream, not concentrated nor containing added sugar or other sweetening matter, excluding Ultra High Temperature · Curd; Lassi; Butter · Chena or paneer, other than put up in unit containers and bearing a registered brand name · Birds’ eggs, in shell, fresh, preserved or cooked · Natural honey, other than put up in unit container and bearing a registered brand name · Bread (branded or otherwise), except when served for consumption and pizza bread |
0% |
| · Condensed milk
· All goods, including refined sugar containing added flavouring or col-ouring matter, sugar cubes · Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagne, gnocchi, ravioli, cannelloni; couscous, whether or not prepared · Curry paste · Mayonnaise and salad dressings · Mixed condiments and mixed seasoning · Diabetic foods · Cocoa butter, fat and oil · All kinds of food mixes including instant food mixes, soft drink con-centrates, Sharbat, Betel nut product known as “Supari”, Sterilized or pasteurized millstone, ready to eat packaged food and milk containing edible nuts with sugar or other ingredients, Check the GST calendar |
12% |
| · All goods i.e. Corn flakes, bulgar wheat, prepared foods obtained from cereal flakes [other than Puffed rice, commonly known as Muri, flat-tened or beaten rice, commonly known as Chira, parched rice, com-monly known as khoi, parched paddy or rice coated with sugar or gur, commonly known as Murki]
· All goods i.e. Waffles and wafers other than coated with chocolate or containing chocolate; biscuits; Pastries and cakes [other than pizza bread, Waffles and wafers coated with chocolate or containing chocolate, papad, bread] · All goods i.e Extracts, essences and concentrates of tea or mate, and preparations with a basis of these extracts, essences or concentrates or with a basis of tea or mate · Soups and broths and preparations · Ice cream and other edible ice, whether or not containing cocoa · Malt extract; food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included. · Extracts, essences and concentrates of coffee · Other non-alcoholic beverages · Waffles and wafers coated with chocolate or containing chocolate |
18% |
| · Pan masala
· All goods [including aerated waters], containing added sugar or other sweetening matter or flavoured · Unmanufactured tobacco, tobacco refuse [other than tobacco leaves] |
28% |
Cost of Logistics:
The FMCG companies are saving a considerable amount in logistics. Due to transparent supply chain management, availability of input credit, elimination of CST has resulted in overall reduction of transportation and distribution cost. This has lead to consumers buying cheaper consumer goods.
Increase in promotional expenses:
Under the previous taxation regime, no VAT had to be charged on free samples but according to sec 17 (5) of the CGST Act, an input tax credit will not be available for goods given as gifts or free samples. As a result of which promotional expenses of FMCG companies has increased, that has resulted in increased prices of some of the FMCG products.
Cost of warehousing:
Under GST, companies can maintain their warehouses wherever they like to. As a result of which the warehousing cost has reduced by 25-40%. Before the GST regime companies had to setup warehouses in those states where the effective tax rate were minimum irrespective of distance. Commodities have become cheaper due to reduced warehousing costs.
Increase in day to day expenses:
Payments are getting blocked at various levels in the supply chain. Implementation of GST has increased working capital costs of FMCG companies as FMCG Dealers and Wholesalers hold up their payments due to uncertainty. But since tax has to be paid in time for the goods supplied, its working capital increases.
New GST Payment and Input Tax Credit (ITC) calculator
Burden on consumer
The burden of indirect tax is bore by the end consumer. Overall GST has a mixed impact on common man. But due to increase in inflation and tax rates on various FMCG products, the end consumer gets looted.
Implementation of the biggest tax regime i.e. GST throughout India (included Jammu and Kashmir) has been one of the biggest economic reforms that India has brought. It is an outstanding step for having a single tax regime throughout the country. Some FMCG companies have passed on the effect to the consumers in the form of low prices. GST rates are being changed at regular intervals which is a progressive step towards the economy. GST in the short run has increased the overall cost of commodities but in the long run it is expected to gain good results for all the sectors of the economy.
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The author of above article is Tanuja Puri, Assistant Professor.
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