Anti-profiteering mechanism a risk for FMCG stocks like Colgate Palmolive: Credit Suisse

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26 Aug, 2025 12:21

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A National Anti-profiteering Authority will be set up for two years and will have the power to order price changes or impose penalties. A move which experts think does not auger well for FMCG stocks such as Colgate-Palmolive, Credit Suisse said in a report.

The market is expecting margin expansion from lower GST rates or input tax credits for Colgate, but with anti-profiteering rules, there could be some downside risk to margins, said the report.

A National Anti-profiteering Authority will be set up for two years and will have the power to order price changes or impose penalties. There will also be a standing committee on anti-profiteering in the GST council and state screening committees.

The new authority is being given the power to determine the methodology and to determine whether the reduction in the rate of tax or the benefit of input tax credits has been passed on to consumers.

The global investment bank is of the view that this can lead to interpretations which can range from looking at operating margins to product price changes.

Initially, anti-profiteering was put in as an enabling clause which the government was reluctant to exercise. However, that view seems to have changed.

There is a feeling that the industry may look to retain some gains as the savings on the rate reduction and input credits are very opaque and complex to calculate, it said.

Colgate is one stock where consensus expects a significant margin expansion in FY18 from the GST rate on toothpaste going down from 25 percent to 18 percent.

“With a clear anti-profiteering mechanism, the company may not want to be seen as in conflict and there could be potential downside risk to margin estimates,” said the Credit Suisse report.

“Toothpaste is one category the government has identified as having an oligopolistic nature of competition and thus will be a focus for any attempt to profiteer from the GST gains,” it said.