GST rate cuts: FMCG sector set for big boost; Britannia, HUL, Nestle to gain

The latest Goods and Services Tax (GST) rate rationalisation is expected to deliver a significant boost to the fast-moving consumer goods (FMCG) sector, according to a report by Nuvama.

As per news agency ANI, the brokerage noted that almost the entire FMCG pack will benefit from the announced tax cuts, which are likely to translate into lower consumer prices and improved margins for companies.

“Recent GST cuts are set to boost FMCG consumption via higher disposable incomes... larger packs shall benefit from price cuts/promotions,” the report stated.


Key categories such as biscuits, toothpaste, soaps, shampoos, toothbrushes, and hair oils have moved into the lower 5 per cent tax slab, while detergents, hair dye, insecticides, skincare, and cosmetics remain unchanged.

Nuvama highlighted that the sharp reductions will benefit companies such as Britannia, Nestle, and Bikaji, while major players like Hindustan Unilever (HUL), Dabur, Colgate, Emami, Godrej Consumer, and Marico are also expected to see gains.

Among them, HUL could benefit the most, as nearly 35 per cent of its portfolio, covering soaps, shampoos, hair oils, oral care products, sauces, ketchups, and jams, now attracts just a 5 per cent GST rate.

For Britannia, about 85 per cent of its portfolio, including biscuits, cakes, and bread, has moved from 18 per cent to 5 per cent.

According to Nuvama, the changes could also lead to margin expansion for staple companies due to higher operating leverage and the absence of an anti-profiteering clause, giving firms flexibility to balance price cuts with stronger sales volumes.

GST Council on Wednesday approved an overhaul of the indirect tax regime, trimming slabs from four to two, with essentials taxed at 5 per cent and other goods at 18 per cent. A 40 per cent rate has been set for luxury and sin items.

The move, effective September 22, is aimed at simplifying compliance, boosting disposable income, and spurring demand across key sectors, including FMCG, retail, automobiles, and consumer durables.

Analysts from HSBC, Jefferies, Kotak, and Standard Chartered have noted that the GST cuts, combined with benign inflation and recent income tax reductions, are expected to revive consumption and lift GDP growth.