Budget 2014: Impact on FMCG and pharma & healthcare sectors

Measure: The basic customs duty on fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils has been reduced from 7.5 per cent to Nil for the manufacture of soaps and oleo-chemicals; the basic customs duty on crude glycerin from 12.5 per cent to 7.5 per cent and crude glycerin used in the manufacture of soaps from 12.5 per cent to Nil.

Impact: FMCG companies like HUL, Godrej Consumer Products and Jyothy Laboratoriess engaged in the manufacture of soap would ensure some savings on their raw material cost bill.

Measure: The personal income tax exemption limit has been increased from Rs 2 lakh to Rs 2.5 lakh in the case of individual taxpayers who are below the age of 60 years.
Similarly, the exemption limit in case of senior citizen has been increased from Rs 2.5 lakh to Rs 3 lakh. Likewise, the investment limit under section 80C of the Income-tax Act has been increased from Rs 1 lakh to Rs 1.5 lakh.

Impact: All FMCG companies are going to benefit from this move, which is going to increase the disposable incomes in the hands of the individuals – giving them room to increase their discretionary consumption.

Measure: The specific excise duty on cigarettes has been increased in the range of 11-72 per cent. Similar increases have been proposed on cigars, cheroots and cigarillos.

Likewise, the excise duty is being increased from 12 per cent to 16 per cent on pan masala, from 50 per cent to 55 per cent on unmanufactured tobacco and from 60 per cent to 70 per cent on gutkha and chewing tobacco.

Impact: For cigarette companies, the Union Budget does not have any surprises as excise duty on cigarettes is raised in most budgets. Excise duty hike on cigarettes has limited implications on most cigarette companies, as eventually they are able to pass on the tax burden to the consumers.

Besides, this time other tobacco products like cigar, cheroots, cigarillos, pan masala, gutkha, chewing tobacco and unmanufactured tobacco have also attracted similar increase in excise duty.

Tops picks of ETIG: HUL, Godrej Consumer Products, ITC, VST Industries