How Will GST 2.0 Transform the FMCG Sector?
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Synopsis
As the GST Council unveils GST 2.0, the FMCG sector is on the brink of a major overhaul. Learn how this reform will reshape tax structures and stimulate market growth, benefitting both urban and rural consumers. Don't miss how these changes will enhance profitability for leading brands ahead of the festive season!
Key Takeaways
- New GST slabs: Simplified to 5% and 18%
- Zero GST: On essential items like milk and bread
- Boost for FMCG: Expected volume growth and rural penetration
- Strategic timing: Effective ahead of festive season
- Long-term benefits: Positive impact on economy and compliance
New Delhi, Sep 5 (NationPress) The fast-moving consumer goods (FMCG) sector is poised for a significant transformation as the GST Council has introduced GST 2.0. This reform streamlines the previous four-tier tax structure into just two slabs – 5 percent and 18 percent, with a 40 percent rate designated for sin and luxury items, according to a recent report.
According to Axis Securities, this reform is expected to catalyze volume growth for FMCG companies, bolster rural market penetration, and enhance profitability, ultimately redefining the sector's growth path in the coming years.
With the new slabs set to take effect on September 22, timed strategically for the festive season, the changes are anticipated to improve affordability and stimulate consumption.
In addition to the rate reductions, GST 2.0 aims to simplify compliance, minimize litigation, and enhance the ease of doing business, thereby fostering a more transparent and predictable tax environment, as noted in the report.
GST on essential items such as milk, paneer, and Indian breads has been reduced to zero from 5 percent. Packaged goods like namkeen, bhujia, noodles, biscuits, pastries, chocolates, juices, and personal care products like toothpaste, shampoos, soaps, and hair oils will now incur only 5 percent GST, down from the previous 12–18 percent tax rates.
According to the report, this change is expected to enhance consumption in both rural and urban markets, benefiting companies under its coverage such as Britannia, Nestle, Colgate, HUL, and Dabur, as well as others like Bikaji, Marico, and Emami.
GST 2.0 represents a groundbreaking pro-consumption reform, with its implementation ahead of the festive season likely to uplift consumer sentiment and promote discretionary spending.
While there may be short-term fiscal challenges for the government, the long-term benefits on consumption, compliance, and capacity growth render this reform a structural advantage for India's economic trajectory, as emphasized in the report.
Point of View
It is crucial to recognize that GST 2.0 is not merely a tax adjustment. It represents a strategic move towards enhancing consumer confidence and driving economic growth. As we embrace these changes, the focus should remain on fostering a transparent and business-friendly environment that ensures sustainable growth for all.
NationPress
05/09/2025
Frequently Asked Questions
What are the new GST slabs introduced in GST 2.0?
GST 2.0 simplifies the tax structure into two slabs: 5 percent and 18 percent, with a 40 percent rate for sin and luxury goods.
How will GST 2.0 affect FMCG companies?
The reform is expected to unlock volume growth, strengthen rural penetration, and enhance profitability for FMCG companies.
When will the new GST rates take effect?
The new GST rates will be effective from September 22.
What items have seen a reduction in GST?
GST on staples such as milk, paneer, and Indian breads has been cut to nil from 5 percent, and many packaged foods and personal care items will now attract only 5 percent.
What is the expected impact on consumer spending?
GST 2.0 is likely to bolster consumer sentiment and drive discretionary spending, especially during the festive season.
