Distributors of fast-moving consumer goods (FMCG) across India, represented by the All India Consumer Products Distributors Federation (AICPDF), have urged large FMCG companies to provide clear written guidelines and establish compensation mechanisms before the new Goods and Services Tax (GST) rates take effect on September 22. The AICPDF, which represents over 450,000 distributors servicing more than 13 million kirana stores, expressed significant concern that distributors holding substantial stock purchased at pre-reform GST rates will suffer financial losses during billing at revised rates post-September 22, unless companies offer mechanisms like credit notes, price protections, or inventory adjustment plans. This uncertainty, they warned, is causing hesitation in further stock purchases and could disrupt the supply chain.

The government's decision involves significant 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, down from 18%. Similarly, GST on butter, ghee, cheese, dairy spreads, pre-packaged namkeens, bhujia, and mixtures will drop from 12% to 5%. While these changes are ultimately intended to benefit consumers through lower prices, companies, distributors, and retailers anticipate short-term challenges in managing old stock and ensuring new, lower-priced stock reaches the market promptly.

Retailers, too, will face difficulties if they continue to hold inventory purchased at higher GST rates beyond September 22. Without a structured process for adjustment or compensation, they would struggle to compete with new supplies at reduced prices, potentially leading to stock dumping, forced liquidation, or disputes among retailers, distributors, and companies. The AICPDF emphasized that for the objective of GST reduction to truly benefit consumers, FMCG companies must transparently communicate new Maximum Retail Price (MRP) implementation timelines, billing adjustments, and transition mechanisms. They also called for uniformity in implementation, cautioning against traditional trade being disadvantaged compared to online and modern trade players who might receive preferential treatment or quicker clarity. Distributors and retailers, they stressed, need timely circulars, FAQs, and training sessions on managing pipeline inventory under the revised GST structure.

FMCG companies are actively evaluating the situation and devising plans to transition smoothly. Some, as reported by Mint, have already begun printing new product packaging with updated prices, expecting this new stock to hit retail shelves by September 22. Colgate-Palmolive India, for instance, welcomed the GST reduction on oral care products from 18% to 5% and stated its intent to deliver lower prices to consumers as soon as possible. Prabha Narasimhan, MD & CEO, Colgate-Palmolive India Ltd, expressed confidence that this step would strengthen efforts for healthier smiles across the country.

Industry players expect that while the shift to lower GST duties will boost consumption in the long term, it will trigger short-term disruption due to existing stocks. Emami Vice Chairman and Managing Director Harsha Vardhan Agarwal noted that everyone is evaluating the situation and seeking verification from the government regarding existing inventory. He added that challenges might differ from company to company, depending on product type and stock levels. Godrej Consumer Managing Director and CEO Sudhir Sitapati predicted that consumers would start receiving FMCG products at reduced prices only by early or mid-next month, as goods take time to reach markets with new MRPs. He termed the period around September as potentially "choppy" due to pipeline changes and stock adjustments, but temporary.

Parle Products Vice President Mayank Shah reiterated that the FMCG industry is awaiting implementation guidelines, with industry bodies already in discussions with the government. He highlighted that challenges vary; for example, food products have a shorter shelf life than personal care items, but a higher velocity. Lalit Agarwal, Chairman and Managing Director of value retailer V-Mart, outlined their plan: they will not change MRP on existing stock labels but will provide a discount on the final bill to consumers, reflecting the GST reduction. V-Mart is updating its billing software and displaying in-store signage to inform customers. Similarly, air conditioner maker Blue Star, though not an FMCG company, detailed its approach to the GST change, stating it would extend benefits to consumers from September 22. Managing Director M. Thiagarajan explained they would compensate dealers for the interest burden arising from excess input tax credit (10% difference between 28% and 18%) on existing stocks, as it would take 3-4 months for dealers to consume this credit, representing a working capital burden rather than a financial loss.

The all-powerful GST Council's decision to reduce taxes on common-use goods aims to boost consumer spending. The new GST structure, effective September 22, will feature two slabs of 5% and 18%, replacing the previous four slabs of 5%, 12%, 18%, and 28%. This means many FMCG products, including personal care and food items, move to the lower 5% slab. Additionally, duty on room ACs and TVs above 32 inches will be reduced to 18%.