FMCG and consumer businesses seek GST reduction to increase consumer demand

By

Isabelle Crossley

Published
May 27, 2020

A number of fast-moving consumer goods and consumer businesses have asked the government to grant goods and service tax cuts ahead of the upcoming GST Council meeting, with the aim of igniting consumer demand. 

The GST Council is expected to meet in June to discuss tax rates, ET Bureau reported. With many consumer goods businesses witnessing sales decrease during lockdown, firms are now looking for ways to increase consumer demand.
 
“Reduction in GST for basic categories from 18% would create a demand stimulus, which is critical to revive the economy,” wholesale retail chain Metro Cash & Carry’s managing director, Arvind Mediratta, told ET Bureau. 

The GST bracket of 18% for around 200 products including shampoo, shaving creams, and toothpaste had previously been at 28% and was reduced by the GST Council by 10% in November, 2017. 
 
GST on Ayurvedic products is currently at 12% and businesses retailing Ayurvedic health and personal care products such as Dabur have asked for a rate reduction to 5%.

“A uniform 5% GST would help popularise Ayurvedic products, which are gaining acceptance among consumers because of their immunity-building properties,” Dabur’s chief executive, Mohit Malhotratold, told ET Bureau.
 
When GST rates are cut, businesses are required to pass on the reduction to the consumer by lowering prices. Businesses hope that price reductions due to GST cuts will encourage people to buy more during this economically uncertain time.