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HUL, P&G prepare for GST, rejig production mix & prices

Consumer goods majors Hindustan Unilever, and Procter and Gamble, among others are rejigging production strategies or firming up product prices to balance out the likely impact on taxes from GST.

April 10, 2017 / 10:07 AM IST
A customer shops in a Casino supermarket in Mouans Sartoux, France, October 27, 2016.    REUTERS/Eric Gaillard  - RTX2QQ3Q : FMCG

A customer shops in a Casino supermarket in Mouans Sartoux, France, October 27, 2016. REUTERS/Eric Gaillard - RTX2QQ3Q : FMCG

 
 
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Indians are currently shelling out more bucks on their daily consumption items like soaps, toothpastes and shampoos. And one likely reason for the hike in higher prices could be attributed to the Goods and Services Tax rollout.

Consumer goods majors Hindustan Unilever, and Procter and Gamble, among others are rejigging production strategies or firming up product prices to balance out the likely impact on taxes from GST.

Companies, which expect tax rates post GST implementation to be lower, are increasing production and pushing stock to their retailers, while those expecting a higher tax incidence are doing the reverse.

Accordingly, HUL has reportedly increased production run expecting fatter margins, while P&G is cutting down on retail stock and production, reports the Economic Times quoting sources.

Most consumer goods companies are expected to attract taxes between 18 percent and 28 percent under the GST regime. HUL is working with the expectation of tax rate to be at the lower end of 18 percent from about 23 percent. P&G, however, expects the tax rates to be at the upper end of 28 percent.

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"Up-stocking and down-stocking would mean there could be a blip in the GDP recorded after GST is rolled out. So, if things go according to what HUL has envisaged and the tax rates are lowered, HUL would reduce its production and first try to sell products manufactured before the GST date, on which old tax rates apply," a tax expert said.

HUL, however, claimed the price increases were to counter steep rise in input costs (particularly vegetable oils and other crude-linked inputs), as it is too early to take pricing strategies based on GST.
first published: Apr 10, 2017 10:07 am

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