GST rate cuts not being passed on? Low-unit FMCG packs face pricing issues; authorities reviewing discrepancies

NEW DELHI: Some FMCG companies and distributors are facing scrutiny after gaps emerged in passing GST benefits to consumers. Companies and distributors are pointing fingers at each other for pricing discrepancies in select packs, even as authorities prepare to take action against those not complying with the new GST rates.

“Distributors can pass only what shows in the system from the companies’ end,” said the head of a major distributor group, speaking to ET on condition of anonymity. “A few large brands have increased base prices of some of their packs, which is not translating to lower prices.”

Trouble in low-priced packs
The issue is particularly evident in packs priced at Rs 20 and below, according to industry and trade sources. Officials at the Central Board of Indirect Taxes and Customs (CBIC) said they may initiate action against brands and ecommerce platforms that raised base prices after the GST reductions, noting that current laws provide the authority to act.

The Delhi High Court ruled on September 30 that increasing product quantity without lowering MRP after a GST cut constitutes “deception”, emphasising that tax cuts are intended to make goods more affordable. FMCG executives pointed out practical difficulties in reducing prices for low-unit packs.

“We are passing on the benefits of the GST reforms across our entire portfolio, through price reduction in some products and increased grammage in others,” said a spokesperson for Perfetti Van Melle India.

Companies call gaps temporary

Executives at companies including Hindustan Unilever (HUL), Colgate-Palmolive , Himalaya Wellness , and Perfetti Van Melle said that GST benefits are being fully passed on and that any pricing gaps are short-lived. Many companies have released advertisements highlighting updated prices for goods manufactured under reduced GST rates.

“For a limited period, products with both the old and new MRPs may be available in the market, and consumers are advised to ask for revised MRPs before purchase,” said a spokesperson for HUL, as quoted by ET. “Trade partners have been communicated to ensure that the benefits of GST rate reductions are passed on to the end consumers.”

HUL noted that it has implemented the reductions either by lowering prices or increasing product weight/volume to avoid odd pricing and simplify transactions. Colgate-Palmolive applied price reductions to existing inventory effective September 22, when new GST rates came into effect.

“Consumers should expect to see the new prices on our new market packs by early November,” said Prabha Narasimhan, managing director of Colgate-Palmolive (India).

E-commerce under the lens

The Central Consumer Protection Authority (CCPA) has referred roughly 2,000 complaints to the CBIC. Officials said a separate team is reviewing transactions on ecommerce platforms, where the majority of consumer grievances have arisen.

“Many large portals have updated their rate lists to reflect the new tax regime, but some issues are product-specific,” an official said.

The government has contacted around 800 brands to fix technical glitches and system delays before October 20. A distributor added that numerous regional FMCG companies are still adjusting their systems to comply with the new GST rates.