Consumer goods companies have told the Central Board of Indirect Taxes and Customs (CBIC) that they cannot reduce retail prices of low-value products in line with GST cuts, arguing that lowering MRPs would disrupt the widely accepted Rs 5, Rs 10, and Rs 20 price bands in the Indian market. Instead, firms plan to increase pack sizes to pass on tax benefits.
Why Prices May Not Drop
For example, biscuits previously priced at Rs 20 included 18% GST. With the new 5% GST slab effective September 22, the MRP should technically drop to around Rs 18. However, FMCG companies believe that pricing at Rs 18 is not consumer-friendly, as buyers are accustomed to round-number price points.
A senior executive explained that reducing MRPs could inconvenience consumers and disrupt sales patterns. To maintain familiarity, manufacturers intend to keep sticker prices intact while increasing the quantity of goods sold.
Pack Size Adjustments
Rishabh Jain, CFO of Bikaji Foods, confirmed that the company will increase “grammage” in impulse packs—small packs that drive spontaneous purchases—to fully pass on GST benefits. Similarly, other FMCG giants like Dabur have assured that consumers will benefit, though largely through larger packs rather than lower prices.
Government’s Response
Officials in the Finance Ministry are examining whether to issue guidelines to prevent “unintentional profiteering” by companies. Although there is currently no formal mechanism to monitor this, the government has indicated it may introduce oversight if benefits are not adequately passed on.
The 56th GST Council meeting approved a simplified structure with three slabs:
- Standard rate: 18%
- Merit rate: 5%
- De-merit rate: 40% (for select goods and services)
Most daily-use FMCG products, including biscuits, soaps, and toothpaste, now fall into the 5% category.
Expert View
According to Namit Purit, Managing Director & Senior Partner at BCG, the overall price movement will remain modest. He noted that popular price points like Rs 5 and Rs 10 will continue, but packs at these rates will offer more value in terms of grams or volume.
Outlook
While FMCG companies remain reluctant to reduce MRPs, consumers can expect bigger packs for the same price, ensuring GST benefits are passed on without disrupting long-established buying habits.
