India’s top consumer goods makers, including Hindustan Unilever Ltd, P&G and L’Oréal, have sent out communication to general trade partners regarding the lowering of goods and services tax (GST) on household items.
The rate cut, effective 22 September following the GST Council’s 56th meeting, has led to fast-moving consumer goods (FMCG) majors communicating offers and changes to distribution networks, highlighting price changes and also outlining the transition to the new rates.
L’Oréal India informed its trade partners that from 22 September, the GST on shampoos and face powders will fall to 5% from 18%.
“Invoicing up to 21 September will continue to be processed at the current GST rates,” per a communication sent by the maker of Maybelline and L’Oréal brands to its trade partners last week. Mint has reviewed a copy of the same.
From 22 September, invoices for these specific items will reflect the newly revised, low GST rates. The company is working towards revised maximum retail prices (MRPs), it said. It assured retail partners that products purchased prior to the change and sold after the prices are revised will be eligible for full input tax credit.
It added that other product categories, such as skincare, perfumes, hair colour, and serums, will continue under the existing 18% GST slab.
The move comes as India is set to roll out revised GST rates, which will lower the prices of household essentials.
Companies are also ensuring transition to new prices by liquidating inventory of existing stock.
Rate revision
Hindustan Unilever, on the other hand, has rolled out a ‘Retailer Bonanza’ from 11 to 20 September with upfront trade offers across categories. These include 4% on all soaps (except Moti), 7% on Moti soaps, 20% on small & medium shampoo bottles, 10% on large bottles, and 20% on XL & XXL packs. Indulekha oil carries a 7% offer, Clinic Plus & Clear oils 11%, while talc and face powders are being offered at 11%. In oral care, Pepsodent and Close Up packs carry 8%, while foods, Horlicks and Boost are at 5% and beverages like coffee and Red Label premix at 7%, it said in a communication.
Procter & Gamble has announced a “GST Special Offer” ahead of the official rate change. Between 10 and 21 September, shopkeepers will get an extra 10% top-up on products moving from 18% to 5% GST (Pantene, Head & Shoulders, Gillette Personal Care, Old Spice, Oral-B) and an extra 5% top-up on items moving from 12% to 5% GST (Pampers, Vicks).
According to a September communication from the FMCG company, products like Tide, Ariel, Whisper, Olay, and Gillette razors remain under the existing slab, and current trade schemes continue.
The government’s decision to revamp GST will lead to sharp tax cuts on a range of daily-use items.
Hair oil, shampoo, toothpaste, toilet soap bars, toothbrushes and shaving cream will now attract 5% GST, from 18% earlier. Similarly, GST on butter, ghee, cheese, dairy spreads, pre-packaged namkeens, bhujia and mixtures will drop to 5% from 12%.
The National president of the All India Consumer Products Distributors Federation (AICPDF), said the move is directed at companies liquidating existing stock in the market. “We have to ensure these benefits move to end consumers,” he said.
Retailer assurance
Meanwhile, Mankind Pharma, which sells brands across consumer products and over-the-counter, said once the revised GST rate is notified, any inventory purchased by retailers at a 12% GST rate may need to be sold at the reduced rate of 5%.
“In this regard, we wish to clarify that the GST credit you’ve earned on inventory bought at the earlier 12% rate is still fully available to you. Even though the selling rate may change to 5%, your right to claim the input credit remains unchanged. There may be a slight delay before the differential credit is fully utilized, but it will remain available for adjustment as usual. Therefore, there will be no financial loss or implication. We encourage you to continue your regular purchasing routines and keep inventory levels stable,” the company added.
Himalaya Wellness Co. has informed its trade partners that several of its consumer products will see a reduction in GST rates from 22 September. Key items moving from higher slabs to 5% GST include baby diaper rash cream, Party Smart, and Prickly Heat Baby Powder (12% → 5%), as well as baby powder, baby hair oil, baby shampoo, hair oil, shampoos, toothpaste, baby soap, and bar soap (18% to 5%). Additionally, baby diapers will move to 5% from 12% GST. Other Himalaya products, such as face wash, lotions, serums, lip balm, massage oils, wipes, and hand wash, will continue under existing GST slabs with no change.
“However, the GST credit you have taken on your inventory bought at the earlier rates is still fully available,” it said in its communication, a copy of which was seen by Mint.
The company encouraged traders to maintain normal procurement, it said.
With the GST rate cut on essentials like shampoos and face powders becoming effective from 22 September, companies are urging retailers to stock up early and pass on the benefits to consumers, aiming for higher offtake in the coming festival season.
