The Federation of Indian Chambers of Commerce and Industry (FICCI) has expressed concerns regarding the impact of GST 2.0 on small-sized FMCG packs. Industry leaders warn that higher GST-led prices may make small packs less viable, potentially affecting affordability and consumption patterns in India’s FMCG sector.
This blog explores FICCI’s viewpoint, implications for consumers, and challenges for FMCG players under GST 2.0.
1. What Is GST 2.0?
GST 2.0 refers to the next phase of the Goods and Services Tax aimed at:
Expanding the tax base
Improving compliance and digital tracking
Streamlining input tax credit mechanisms
Reducing tax evasion and leakage
While GST 2.0 is designed to improve efficiency, FMCG players say it may increase costs for smaller pack sizes.
2. FICCI’s Concerns on Small-Pack Pricing
Viability Issues: Small packs often have thin margins, which may be eroded by GST 2.0 led price hikes.
Consumer Affordability: Price increases may impact low-income consumers who prefer smaller, affordable packs.
Volume Impact: FMCG companies may face reduced demand for small packs, affecting sales volumes.
Industry Challenge: Companies may need to rebalance pricing and packaging strategies to remain profitable.
3. Potential Impact on FMCG Players
Pricing Adjustments: Companies may increase prices for small packs or introduce new pack sizes.
Supply Chain Reassessment: Increased compliance may lead to higher operational costs.
Market Strategy Changes: FMCG players might focus more on medium and large packs to maintain profitability.
Innovation Pressure: Need to innovate packaging and promotions to sustain consumer demand.
4. Impact on Consumers
Affordability: Small packs may become less accessible to price-sensitive consumers.
Consumption Patterns: Consumers may shift to larger packs or alternate brands, impacting purchase frequency.
Value Perception: FMCG brands need to justify higher prices with better quality or value-added features.
5. Industry Suggestions
FICCI and FMCG associations recommend:
Reviewing GST slabs for small packs to prevent pricing shocks
Flexible taxation or exemptions for low-margin packs
Encouraging innovation to reduce cost impact while maintaining affordability
These measures can help protect both industry profitability and consumer access.
Conclusion
FICCI’s warning highlights the potential challenges GST 2.0 poses for small-sized FMCG packs. As taxation evolves, industry players must adapt their pricing, packaging, and supply chain strategies to remain competitive. Meanwhile, policymakers may need to consider exemptions or flexible GST rates to protect both businesses and consumers.
The coming months will be crucial in balancing compliance, profitability, and affordability in India’s FMCG sector.
FAQs
Q1: What is GST 2.0?
A: GST 2.0 is the next phase of Goods and Services Tax with enhanced compliance, digital tracking, and input tax management.
Q2: Why are small-sized FMCG packs affected?
A: Small packs have thin margins, and GST-led price increases may make them less profitable.
Q3: How will consumers be impacted?
A: Prices of small packs may rise, affecting affordability for low-income consumers.
Q4: What can FMCG companies do?
A: They can adjust pricing, innovate packaging, or focus on larger pack sizes.
Q5: Will the government take action?
A: Policymakers may consider exemptions or flexible GST rates to support small-pack viability.
Published on : 12th September
Published by : SMITA
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