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Last Updated : Jun 09, 2017 05:48 PM IST | Source: Moneycontrol.com

Be prepared to face shortage of FMCG products as GST comes into force

After reports of pharmaceutical shortages due to upcoming GST implementation, there is doubt if fast moving consumer goods (FMCG) products will also be off the shelves soon.

After reports of pharmaceutical shortages due to upcoming GST implementation, there is doubt if fast moving consumer goods (FMCG) products will also be off the shelves soon.

Online grocery stores like BigBasket, Amazon pantry, and ZopNow are already offering huge discounts on FMCG items to get rid of the existing stock of goods as soon as possible.

While big companies like ITC and PepsiCo have started gearing for GST since last year, smaller companies and retailers have not had the resources to do so.

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“The concern for us is there may be a shortfall in inventory just after the GST rollout,” Vipul Parekh, cofounder of BigBasket, told Economic Times. “We have asked FMCG companies to ensure that stocks are not impacted in the three months just after the GST implementation.”

FMCG retailers are pushing stocks ahead of GST rollout to avoid complications regarding tax compliance for old inventory. This is, in turn, making them worried about having adequate stock post-GST.

Though big FMCG companies are trying to keep their supply steady many will be hit by the GST as certain products are to become costlier. For example, Ayurvedic products, which earlier enjoyed a lower tax, will now be taxed at 12 percent; this will hurt medium-sized companies like Dabur, Emami, and Patanjali.

Mass consumption products like fresh food are exempted from tax and this is expected to incentivise FMCG production by making their raw material cheaper.

Packaged and frozen food are put under 5 percent and 12 percent tax slabs meeting the expectation of FMCG companies. But some products like biscuit, jam, pasta, toothpaste, and cornflakes will come under a higher tax slab of 18 percent and premium items like shampoo, shaving cream, instant coffee etc. will come under 28 percent. The manufacturers of these high-taxed products will see some hardship in terms of compliance as well as marginal decrease in demand due to higher prices. The biscuit manufacturers have already expressed discontent about the 18 percent tax slab as they argued that biscuits are consumed by people of all classes.

Demerit FMCG goods like aerated drinks will also attract a higher tax of 28 percent with an addition of 12 percent cess leading to a hike in aerated beverage prices across the country. This has made concerned companies quite worried.

Indian Beverage Association (IBA) told Business Line the tax increase on beverages would hinder the growth of the beverage industry in India.

Messages sent by medicine retailers to their customers expressing concern about stock shortage has created chaos and the FMCG market is, in all probability, heading for the same.

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First Published on Jun 9, 2017 05:48 pm

tags #GST

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