Recent reductions in GST are expected to enhance FMCG consumption through increased disposable incomes, more effective promotions, and additional grammage in smaller packs; larger packs will benefit from price reductions and promotions, according to a report by brokerage Nuvama Institutional Equities.
The brokerage noted that key beneficiaries include Britannia, Bikaji, and Nestle. Other companies like Emami, Dabur, Hindustan Unilever Ltd (HUL), Colgate, Godrej Consumer, and Marico are also expected to gain.
Significant changes have been observed in biscuits, toothpaste, soaps, shampoos, toothbrushes, and hair oils, while cigarettes and CSD remain unchanged for the time being. Detergents, hair dye, household items, skincare, and cosmetics are also unchanged. It is important to monitor the input tax offset, especially for home and personal care products.
Most positive impact: Britannia, Colgate, Nestle and HUL
Among the major players in the FMCG sector, HUL is poised to gain significantly, as about 35% of its product range, including soaps, shampoos, hair oils, oral care products, sauces, ketchups, and jams, will now be subjected to a reduced GST rate of only 5%.
Likewise, for Britannia, approximately 85% of its product lineup, which consists of biscuits, cakes, and bread, was previously taxed at 18% but will now fall within the 5% category.
This substantial tax reduction will enable these companies to relay the benefits to consumers, while also enhancing their market presence.
For Nestle, approximately 70% of its operations (including confectionery, instant coffee, the Maggi lineup, and condensed milk) will shift to a 5% tax rate. In the case of Colgate, 95% of its products (toothpaste and toothbrushes) were previously subject to an 18% rate, but will now be moved to a 5% rate.
However, certain segments remain unchanged. Categories such as detergents, hair dyes, household insecticides, skincare products, and cosmetics have not experienced any adjustments in tax rates. Paint manufacturers also remain under the previous tax structure, as no reductions have been announced.
In summary, the report highlighted that the rationalization of GST rates is set to provide a widespread advantage to the FMCG industry.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
