The Institute of Chartered Accountants of India (ICAI), through its GST & Indirect Taxes Committee, has released the “GST Sectoral Guide on Fast-Moving Consumer Goods”, a comprehensive sector-specific publication aimed at providing practical guidance on the Goods and Services Tax framework applicable to the Fast-Moving Consumer Goods (FMCG) industry. The publication, updated with relevant Finance Act, 2026 amendments, is the second publication under ICAI’s Industry-Specific GST Publication Series and seeks to address the distinctive tax and compliance issues arising across the FMCG supply chain.
The Guide covers the GST implications of major FMCG business models involving manufacturers, depots, carrying and forwarding agents, super stockists, distributors, retailers, contract manufacturers and e-commerce or quick-commerce platforms. It deals extensively with issues relating to classification of products, determination of applicable GST rates, stock and branch transfers, composite and mixed supplies, place and time of supply, valuation, input tax credit, promotional schemes, discounts, free samples, job work, e-commerce transactions and documentation requirements.
A significant focus of the publication is on classification and rate determination of FMCG products. The Guide refers to Notification No. 09/2025-Central Tax (Rate), which prescribes the consolidated GST rates for goods based on tariff classification. ICAI has emphasised that classification should be determined with reference to the Customs Tariff Act, Section Notes, Chapter Notes, General Rules for Interpretation and relevant HSN principles, rather than merely on the basis of trade name, branding, packaging or marketing description.
The publication also highlights the revised treatment of “pre-packaged and labelled” commodities pursuant to Notification No. 10/2025-Central Tax (Rate) dated 17 September 2025. The amended framework links the expression “pre-packaged and labelled” with the meaning assigned under Section 2(1) of the Legal Metrology Act, 2009. Accordingly, FMCG businesses dealing in products such as rice, pulses, flour, cereals, spices, dry fruits and similar commodities are advised to examine their packaging and labelling requirements alongside the applicable GST classification.
On registration requirements, the Guide reiterates that the enhanced threshold of ₹40 lakh for eligible persons engaged exclusively in the supply of goods is governed by Notification No. 10/2019-Central Tax dated 7 March 2019, subject to the prescribed conditions. Given the widespread inter-State distribution and warehousing structure of organised FMCG businesses, however, the publication notes that multiple State-wise GST registrations continue to be a significant feature of the sector.
For smaller FMCG suppliers operating through online marketplaces, ICAI has highlighted the relaxation provided through Notification No. 34/2023-Central Tax dated 31 July 2023, effective from 1 October 2023. Subject to the prescribed conditions, eligible suppliers of goods through electronic commerce operators may avail the threshold exemption from compulsory registration where, among other requirements, they do not undertake inter-State supplies and obtain the prescribed enrolment number on the GST portal.
The publication gives particular importance to the mandatory Input Service Distributor (ISD) framework, which has major implications for large FMCG companies incurring common expenses such as national advertising, digital marketing, ERP licences, legal and professional services, market research and employee training at the head-office level. Pursuant to the amendments under the Finance Act, 2024 and Notification No. 16/2024-Central Tax dated 6 August 2024, the revised ISD framework became mandatory with effect from 1 April 2025 for covered common input services attributable to multiple GST registrations. ICAI has accordingly stressed the need for proper identification of beneficiary registrations and distribution of credit in accordance with Section 20 and Rule 39.
The Guide further discusses the Invoice Management System (IMS) and the evolving ITC framework. It refers to Notification No. 16/2025-Central Tax dated 17 September 2025, effective from 1 October 2025, which brought into force changes to Section 38 and provided statutory recognition to a system in which the recipient’s actions, including acceptance, rejection or keeping invoices pending, influence the statement of available input tax credit. ICAI has advised FMCG businesses with large vendor networks to strengthen monthly reconciliation, supplier monitoring and GSTR-2B/IMS controls.
With regard to time of supply, the publication refers to Notification No. 66/2017-Central Tax dated 15 November 2017, under which registered suppliers of goods are generally not required to discharge GST merely on receipt of advances. Consequently, in ordinary FMCG transactions involving goods, GST liability typically arises with reference to the invoice requirements applicable to the supply. In relation to reverse charge transactions, the Guide also notes Notification No. 20/2024-Central Tax, effective from 1 November 2024, and the corresponding requirement under Rule 47A concerning issuance of self-invoices within the prescribed period in applicable cases.
For multinational FMCG groups, the Guide examines the GST treatment of imported services such as management support, technical know-how, software support, global advertising allocations, market research and brand-related services. Such imports may attract GST under the reverse charge mechanism in accordance with the IGST Act read with Notification No. 10/2017-Integrated Tax (Rate). The publication also discusses the principles emerging from the Supreme Court’s decision in Northern Operating Systems Pvt. Ltd. and CBIC Instruction No. 05/2023-GST dated 13 December 2023, emphasising that secondment arrangements must be examined on their individual contractual and factual circumstances rather than subjected to a mechanical tax treatment.
ICAI has devoted substantial attention to free samples, gifts and promotional schemes, which are particularly prevalent in the FMCG industry. Referring to CBIC Circular No. 92/11/2019-GST dated 7 March 2019, the Guide explains that genuine free samples supplied without consideration are ordinarily not treated as taxable outward supplies, subject to the Schedule I provisions, although corresponding ITC may be restricted under Section 17(5)(h). In contrast, schemes such as “Buy One Get One Free” are generally regarded as supplies made for a consolidated consideration rather than independent free supplies, requiring examination as composite or mixed supplies depending upon the nature of the bundled products.
On post-sale discounts and dealer incentives, ICAI has examined the changes proposed through the Finance Act, 2026 to Section 15(3)(b) of the CGST Act. The Guide notes that the amendment seeks to remove the existing requirements relating to pre-agreement and specific linkage of post-supply discounts with individual invoices, with the focus shifting to issuance of a credit note and reversal of proportionate ITC by the recipient. Importantly, ICAI has clarified that the Finance Act, 2026 amendment will operate only from the date separately notified by the Central Government and that the existing provisions continue to apply until such notification. The publication also refers to Circular No. 251/08/2025-GST dated 12 September 2025 in the context of commercial/financial credit notes and post-sale discount arrangements.
The Guide also analyses supplies made through e-commerce and quick-commerce platforms such as online marketplaces and instant-delivery platforms. It examines TCS obligations under Section 52, treatment of platform-funded and manufacturer-funded discounts, sponsored listing and advertising expenditure, stock transfers to fulfilment centres and refund of excess electronic cash ledger balances. In addition, CBIC Circular No. 240/34/2024-GST dated 31 December 2024 has been discussed in the context of Section 9(5) supplies, clarifying that such supplies remain taxable supplies and are not to be regarded as exempt supplies merely because the e-commerce operator bears the responsibility to discharge GST.
The publication separately covers exports and notes that, pursuant to Notification No. 1/2023-Integrated Tax dated 31 July 2023, as amended by Notification No. 5/2023-Integrated Tax dated 26 October 2023, the option to export on payment of IGST has been restricted for certain specified goods, including notified pan masala and tobacco products. Exporters of such notified products are required to follow the prescribed bond/LUT mechanism without payment of integrated tax and claim eligible refund of unutilised ITC in accordance with law.
Another important area addressed is the special Retail Sale Price-based valuation mechanism under Rule 31D, effective from 1 February 2026, for notified pan masala and specified tobacco products. The Guide explains that for goods covered by the Rule, GST valuation is linked to the declared retail sale price instead of the ordinary transaction value mechanism, representing a significant departure from the general valuation principle under Section 15.
The publication also incorporates important judicial and advance-ruling developments, including the Supreme Court rulings in Commissioner of Customs (Import) v. Welkin Foods Pvt. Ltd. (2026) on tariff classification principles and Hamdard (Wakf) Laboratories v. Commissioner, Commercial Tax, Uttar Pradesh (2026) concerning classification of Rooh Afza. It further discusses the Gujarat advance ruling in Doms Industries Pvt. Ltd. on mixed supplies, the Columbia Asia Hospitals ruling relating to supplies between distinct GST registrations and the Madras High Court ruling in Supreme Paradise on post-sale discounts.
Through the publication, ICAI has sought to provide a practical compliance framework for an industry characterised by high transaction volumes, extensive distribution networks, rapid inventory movement, promotional campaigns, expiry-related losses, e-commerce expansion and complex credit flows. The Guide is expected to serve as a useful reference for Chartered Accountants, tax professionals, FMCG manufacturers, distributors, retailers, finance teams and other stakeholders in understanding and implementing the continuously evolving GST framework.
The publication has been brought out by the GST & Indirect Taxes Committee of ICAI as part of its continuing initiative to strengthen sector-specific GST knowledge and support professionals and businesses in addressing practical compliance and interpretational challenges.
The Guide can be accessed can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/08/GST-Sectoral-Guide-on-Fast-Moving-Consumer-Goods-11.08.2026.pdf
