GST just made your bath more refreshing

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HIGHLIGHTS

  • FMCG companies have slashed prices of soaps, passing on the tax benefits they have got from the GST
  • Tax incidence on soaps, hair oils and toothpaste have come down to 18 per cent from the earlier rates of 24-25 per cent.

Fast moving consumer goods (FMCG) companies have slashed prices of soaps, passing on the tax benefits they have got from the GST (Goods and Services Tax) regime that kicked off from July 1.

Under the GST ambit, the tax incidence on soaps, hair oils and toothpaste has come down to 18 per cent from the earlier rates of 24-25 per cent.

Market leader HUL (Hindustan Unilever) which makes soaps such as Dove, Lifebuoy, Lux and Pears, along with Godrej Consumer Products (GCPL) and Wipro Consumer Care & Lighting have slashed prices by up to 8 percent on stocks dispatched from July 1 onwards. Godrej has soap brands such as Cinthol, Godrej No.1, Fairglow, while Wipro manufacturers soaps like Yardley and Santoor. It may be another 1-2 weeks before these stocks reach the consumers, analysts said.

Other consumer goods companies such as Patanjali, ITC, Emami, Colgate-Palmolive and Marico have also passed on GST benefits to consumers, either by slashing prices or by increasing the volume of products, said analysts.

HUL has added 35 per cent extra volume on its premium soap brand Dove, and 33 percent volume to Pears. Godrej has reduced the price of a 100 gm pack of four Godrej No.1 soaps to Rs 66 from Rs 72. It has also slashed the price of a 75 gm Fairglow soap to Rs 70 from Rs 75 earlier.

Industry experts believe the price cuts will be revenue neutral for FMCG companies as they have merely passed on the tax benefits to consumers.

It’s not just bathing soaps, but other forms too such as detergent soaps and utensil washing bars have become cheaper post-GST. HUL’s Rin bar for washing clothes, for instance, has gotten cheaper by Rs 3 for a 250 gm bar.

However, for those who enjoy body washes or liquid soaps in the shower, may need to brace for higher prices as liquid soaps have been put in the highest tax category of 28 percent, up from the previous 24-25 percent. Although, FMCG companies so far have mostly absorbed cost spikes due to GST, while passing on the benefits wherever the tax incidence has come down.

“We expect increases in prices of liquid soaps and detergent powder as they have been placed in the highest GST tax category of 28 percent,” a Delhi-based dealer said.

Under the GST regime, while soaps in the form of bars, cakes or moulds which are high-volume mass-use products have been put in the 18 percent tax bracket, soaps in liquid or cream form including shampoos and conditioners attract the highest tax incidence of 28 percent.

GST is India’s most ambitious tax reform since independence and subsumes over a dozen central and state taxes that were levied on goods and services earlier. Bringing the country under a uniform tax regime, GST is expected to add 2 percent to India’s GDP (gross domestic product).

 

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