India’s FMCG sector is seeking a more predictable policy environment as companies navigate rising compliance requirements, working capital pressures and regulatory complexity while preparing for the next phase of consumer growth.
A Deloitte India-FICCI report, Consumer trends IGNITEing growth and governance released on August 4, has highlighted a series of policy interventions needed to support India’s consumer economy, which is expected to approach $1.9 trillion by 2030.
The report identifies GST inversion, limitations in input tax credit (ITC) refunds, challenges in realising the benefits of Free Trade Agreements (FTAs), expansion of Quality Control Orders (QCOs), fragmented waste management rules and overlapping regulations as key areas requiring attention.
While GST 2.0 has reduced tax rates on several everyday FMCG products, companies continue to face structural challenges because input costs often attract higher tax rates than finished products.
The report noted that products such as packaged namkeen, sauces, pasta, instant noodles, chocolates, coffee, butter, ghee and cornflakes have moved into lower tax slabs, providing relief to consumers.
However, FMCG companies continue to accumulate unutilised ITC because several inputs and services, including packaging, logistics, warehousing, marketing and e-commerce commissions, continue to attract higher GST rates compared with certain finished goods.
This inverted duty structure creates working capital pressure for companies operating high-volume, low-margin businesses, as tax credits remain blocked instead of being deployed for expansion, innovation or supply chain investments.
The report said that although GST law provides for refunds in cases of inverted duty structures, restrictions on refund calculations and exclusion of certain input services limit the ability of businesses to recover accumulated credits.
For FMCG companies, this is particularly significant because contract manufacturing, transportation, warehousing and other services form an important part of modern consumer supply chains.
The report recommended rationalising GST rates across inputs, input services and finished products to reduce credit accumulation. It also called for simpler refund procedures, faster processing timelines and regular industry-government reviews to address emerging inversion issues.
FTA gains being diluted by compliance requirements
The report also highlighted that the benefits of FTAs are not always translating into expected cost advantages for FMCG companies because tariff reductions are often accompanied by domestic compliance requirements.
While FTAs are designed to improve access to competitively priced raw materials and inputs, businesses continue to face requirements related to BIS Quality Control Orders, FSSAI approvals and labelling regulations.
The report said these standards play an important role in ensuring product quality and consumer safety, but they can also create additional approval timelines, certification costs and supply chain challenges.
As a result, FMCG companies are increasingly shifting from cost-driven sourcing models to compliance-led procurement strategies.
Companies are building diversified supplier networks, developing local backup options and prioritising certified vendors to reduce disruptions.
The report said addressing these implementation gaps would be essential to ensuring that trade reforms deliver their intended benefits for domestic manufacturing competitiveness.
QCO expansion creates supply chain pressure
The expansion of BIS Quality Control Orders has emerged as another area of concern for FMCG companies.
The report said QCOs have strengthened product quality and consumer protection but have also increased compliance requirements for raw materials, packaging inputs and imported components.
Many FMCG companies rely on specialised suppliers across global markets for ingredients, packaging materials and other critical inputs.
Mandatory certification requirements can reduce supplier availability, increase lead times and raise input costs, especially where international suppliers are not immediately compliant with Indian standards.
The report recommended that QCO implementation should be calibrated based on sector risks and operational realities.
It also called for avoiding regulatory duplication in industries where existing safety and quality frameworks are already established.
States’ DRS plans need national framework
The report also flagged concerns over emerging state-level Deposit Refund Schemes (DRS), warning that fragmented approaches could increase compliance complexity for businesses.
States including Goa and Himachal Pradesh have introduced DRS frameworks aimed at improving packaging collection and recycling by incentivising consumers to return waste such as plastic containers, tetra packs and glass bottles.
However, the report said different state-level requirements on deposits, coding systems, reporting obligations and packaging standards could create parallel compliance structures alongside the national Extended Producer Responsibility (EPR) framework.
The report recommended a nationally harmonised DRS framework under the Ministry of Environment, Forest and Climate Change that integrates collection outcomes with the existing EPR system.
It suggested common traceability standards, mutual recognition of compliance credits and stakeholder consultation before wider implementation.
A coordinated approach, the report said, would help achieve circular economy objectives without increasing regulatory fragmentation.
New waste rules could expand business obligations
The report also examined the proposed Solid Waste Management Rules, 2026, saying they align with India’s circular economy objectives but could materially expand responsibilities for businesses.
Large FMCG manufacturers, retailers, warehouses and institutional establishments could face additional obligations under the Extended Bulk Waste Generator Responsibility framework.
The report said businesses may move from being passive waste generators to active participants responsible for collection, processing, channelisation and environmentally sound disposal.
Mandatory segregation requirements could also require operational changes across manufacturing facilities, warehouses, offices and retail networks.
The report recommended clear implementation guidelines, adequate transition periods and greater coordination between regulators and businesses.
Cosmetics sector seeks regulatory overhaul
The report highlighted the need for reforms in India’s beauty and personal care sector, including faster approvals, digital regulatory processes and globally aligned standards.
It recommended clearer guidance for cosmetic claims such as “clinically tested”, “dermatologically tested”, “anti-dandruff” and “anti-acne” to reduce inconsistent interpretations.
Other recommendations include uniform implementation of the Cosmetics Rules, 2020, simplified licensing for dual-use ingredients and a notification-based post-market surveillance framework.
The report said a dedicated cosmetics regulatory framework could improve consumer safety while supporting exports, innovation and investment.
Industry calls for predictable regulation
The report also recommended broader Ease of Doing Business reforms, including expanding the National Single Window System, reducing overlapping regulations and introducing risk-based compliance.
It called for mandatory stakeholder consultations before major regulatory changes and predictable transition periods for new labelling, packaging and disclosure requirements.
Highlighting the importance of regulatory alignment, Director General of FICCI, said:
“The transformation of India’s consumer economy is creating opportunities that span businesses, consumers and the wider economy. As the sector continues to evolve, policy frameworks will play an increasingly important role in enabling innovation, safeguarding consumer interests and supporting sustainable growth. Continued engagement between industry and government will be critical to ensuring that regulation keeps pace with market developments while unlocking the full potential of India’s FMCG, retail and e-commerce sectors.”
The report concluded that improving regulatory predictability would be critical for enabling investment, strengthening manufacturing competitiveness and supporting India’s ambitions to become a global consumer goods hub.
