GST 2.0: Consumer brands adjust prices to benefits consumers

As the implementation of GST 2.0 approaches on 22 September, consumer product companies across India are actively adjusting their pricing strategies to pass on the benefits of the revised tax rates to consumers.

FMCG companies, including major players like Parle Products and Mother Dairy, have started reducing prices on a wide range of products. The price cuts are not limited to larger packages but also extend to popular, low-cost items typically priced at INR 5 and INR 10. This is a crucial move, as these price points are entry barriers for many consumers. For instance, Mother Dairy is reducing the price of its INR 10 ice cream pack to INR 9, a change it believes will be seamlessly managed through the widespread use of digital payment systems like UPI, mitigating concerns over coinage issues at the retail level. The company affirmed its commitment to passing on 100% of the tax benefit to consumers, with its entire portfolio now falling under the nil or 5% GST slab.

Parle Products is also aligning its prices with the new rates, a process that requires a practical approach to inventory management. With a supply of pre-printed wrappers for the next two to three months, the company will use inkjet printing to add the new maximum retail price (MRP) alongside the old one. The goal is to ensure the price reduction reaches the consumer directly, with a long-term plan to return to popular price points like INR 5 and INR 10 by offering higher grammage.

Meanwhile, the consumer durables industry is employing a different strategy to manage the transition and clear older inventory. Companies like Haier India and Super Plastronics (licensing brands such as Thomson, Kodak, and Blaupunkt) have initiated attractive pre-booking offers on products like air-conditioners and LED TVs. These offers feature reduced pricing in line with the revised tax rates, with billing and delivery scheduled for after 22 September. This proactive approach helps manufacturers and dealers liquidate existing stock while capitalising on anticipated demand, particularly with the upcoming festive season.

The revised GST structure, which consolidates the earlier 12% and 28% rates into a simpler two-slab system of 5% and 18%, is expected to simplify compliance and boost consumption. Companies are now focused on ensuring a smooth transition to the new tax regime, balancing the need to clear old stock with the imperative of passing on tax benefits to the end consumer.