CBEC chief’s missive to FMCGs: Pass on benefits post GST tweak

NEW DELHI: Keeping up the pressure on the consumer goods sector, the Central Board of Excise and Customs (CBEC) chairman has written to the biggest companies to ensure that cuts in the goods and services tax (GST) are passed on to customers. The GST Council has cut rates on 178 products including chocolates, detergent, toothpaste, shampoo, air freshener and shaving cream to 18% from 28% and the government is keen that this translate into lower prices for buyers.

“We have reached out to over 100 companies,” CBEC chairman Vanaja Sarna told ET. “This is essentially an appeal asking them to pass on the tax cuts to consumers.” India’s biggest fast-moving consumer goods companies include Hindustan Unilever, ITC, Nestle, Dabur, Godrej Consumer Products, Amul, Perfetti Van Melle, L’Oréal and Mondelez.

A top executive at a large diversified consumer products maker confirmed it had got the letter. “We received a letter from CBEC, asking that benefits of the tax reductions announced by the GST Council be passed on to buyers,” he said. “We received the letter on Friday.”

Finance secretary Hasmukh Adhia had told ET that it was up to companies to ensure the benefits of tax cuts were passed on. “It is the company’s responsibility to ensure that its entire retail chain follows its directives on pricing,” Adhia said in the November 20 interview. “If a trader is not selling a good at revised MRP (maximum retail price), then it is the responsibility of the company.”



Boost to Consumption
“It (the company) will have to respond to the National Anti-profiteering Authority on this. Action can only be taken against organised players as they are the ones who decide MRP. We don’t want that industry should suffer, but at the same time consumers should also not suffer,” Adhia had told ET.

The cabinet last week approved the establishment of the National Anti-profiteering Authority (NAA) in this regard.

The GST Council had on November 10 moved 178 items, including washing powder, toothpaste, tooth powder, shaving cream, deodorants and chocolates, to the 18% GST slab from 28%. A day after the notification of reduced rates by the Centre and states, companies had begun instructing trade partners, including distributors, stockists and retailers, to sell products on which taxes were reduced at lower prices to consumers, irrespective of the printed MRP. Companies have until December to apply new price stickers according to an order issued by the consumer affairs ministry.

But the government is keen that even before this happens, a process that may take time, companies direct the trade and also communicate to consumers directly on price reductions.

“Yes, we are in receipt of the letter over the weekend,” said a cosmetics company executive. “We are fast-tracking on packaging products with revised prices. There is no question of not passing on the benefits to consumers immediately.

The reduced pricing is expected to spur consumption in a category that has otherwise been subdued. The existing inventory is expected to be replaced with fresh stock bearing new price tags in about two-four weeks.

A government statement issued late Monday evening said CBEC chairman Sarna has written to all major fast-moving consumer goods companies, pointing out the need to immediately revise MRP for products on which tax rate has been reduced.