Fast-moving consumer goods (FMCG) companies have clarified to tax authorities that they cannot directly reduce the prices of low-cost daily essentials such as Rs 5 biscuit packs, Rs 10 soaps, and Rs 20 toothpaste packets, despite the Goods and Services Tax (GST) rate cut, according to a report by moneycontrol.com.
The firms explained that Indian consumers are accustomed to fixed price points, and any shift to irregular price tags—like Rs 9 or Rs 18—may cause confusion and inconvenience during transactions.
Instead of cutting MRPs, companies plan to retain existing price points but increase the quantity offered in each pack. For instance, a Rs 20 biscuit pack may soon contain extra grams of biscuits, effectively passing the GST benefit to buyers in the form of added value rather than lower sticker prices.
Executives from leading FMCG companies confirmed the move:
Bikaji Foods CFO Rishabh Jain said the company would increase the weight of its smaller “impulse packs” so that buyers get more value.
Dabur CEO Mohit Malhotra told moneycontrol.com that businesses would “definitely pass on the tax cut to customers,” stressing that reduced GST would boost demand for everyday essentials.
This approach aligns with India’s unique consumption pattern, where Rs 5, Rs 10, and Rs 20 packs dominate rural and semi-urban markets, serving as the backbone of mass consumption.
While the industry has welcomed the tax cut, the Finance Ministry is keeping a close watch. Officials are considering issuing guidelines to ensure that the benefits of GST reduction are passed on to consumers and not absorbed entirely by the companies.
The GST Council recently slashed tax rates on most mass-consumption goods to 5%, down from 18% in categories like biscuits and similar packaged items. Experts note that while consumers may not see a direct price drop, the benefit will reflect in bigger pack sizes at unchanged price points.
Market analysts believe that although direct price reductions may remain modest, consumers will benefit through enhanced pack sizes. This strategy not only avoids disrupting buyer psychology but also supports higher demand in both rural and urban markets, where affordability is critical.
The move is also expected to create a short-term volume boost for FMCG companies, while long-term growth could stem from higher consumption of affordable brands.
The recent GST rate cut provides much-needed relief to both the FMCG sector and consumers, especially in the context of rising input costs and inflationary pressures.
Although companies are unlikely to reduce the MRPs of their popular Rs 5, Rs 10, or Rs 20 packs—given the strong psychological attachment Indian shoppers have to these fixed price points—consumers will still benefit in a meaningful way.
Firms are choosing to pass on the advantage by offering larger pack sizes or extra grams of product for the same price, ensuring better value for money. This strategy not only safeguards consumer trust but also helps sustain demand in both rural and urban markets, where affordability is crucial.
With the Finance Ministry closely monitoring compliance, this “extra value at the same price” approach could enhance overall consumption, support industry growth, and stimulate broader economic activity in India’s mass-market ecosystem.