MC EXCLUSIVE Firms will 'definitely' pass on GST cut benefits in push for bigger consumption bite: Dabur CEO

Mohit Malhotra, chief executive officer of Dabur India

Companies will definitely pass on the goods and services tax (GST) rate cut benefits to the consumers as that will lead to an uptick in consumption, Dabur India chief executive officer Mohit Malhotra told Moneycontrol on September 11.

"We at CII (Confederation of Indian Industry) are taking this issue up sector-wise…we’re confident the price reduction will take place as soon as the new rates are in effect," Malhotra said on the side-lines of a CII event, titled "Next Gen GST Reforms".

The 56th GST Council meeting, held last week, approved the overhaul of the indirect tax system by modifying the regime into a "simple tax" with a standard rate of 18 percent and a merit rate of 5 percent. A special de-merit rate of 40 percent will be levied for a select few goods and services. Most of daily use items are now in the 5 percent slab.

On the classification issue, which existed earlier, Malhotra said that most of it is now "resolved". "Different tax rates were levied on branded and unbranded products, or those with slightly different varieties…all that has ended," he said.

Last year, the GST rates applicable on popcorn had become a major point of discussion last year when the Council had introduced different levies for multiple varieties of popcorns.

Under the new GST regime, popcorn mixed with salt and spice will attract 5 percent GST regardless of whether it is sold loose or pre-packed and labelled. Caramel popcorn will also be taxed at 5 percent as rates for sugar confectioneries have been slashed to 5 percent. The older rate structure had come under criticism for the 5 percent rate on spiced/salted popcorn sold loose and 12 percent if the same product was sold pre-packaged and labelled. Caramel popcorn was charged at a rate of 18 percent.

The Dabur CEO, however, added that the "inverted duty structure" problem is not fully resolved. He explained that on services costs, the industry has to pay 18 percent GST, but the end-product attracts only 5 percent. "We don’t get input tax credit on services, such as warehousing costs and media costs. We hope going forward those issues are addressed as well," Malhotra said.