Did the Indian Consumers Benefit from GST?

Did the Indian Consumers Benefit from GST?

GST (goods and services tax – the new value added tax regime in India introduced in July 2018) [] has created a lot of turmoil in the economic, political and social spheres in India over the last one year. While the long run effect of the same, across many sectors are yet to be revealed; it looks like the branded DFMCG market has been quite a beneficiary of the GST regime. At least the data of last one year indicates multiple benefits in this vertical. The immediate quarters after GST was disastrous for many of the brands, just because the supply chain involving tens of thousands of wholesalers required time to adjust to the new norms and secondary purchases were halted. However, after one or two such quarters most of the brands started to grow again and brought up to normalcy in the next two quarters.

We have analysed a number of categories in the FMCG domain in India in terms of volume, value, tax, benefits passed on to the consumers for last one year and many of the insights has a positive notion for the end consumers.

Overall, the FMCG volumes have increased; while values may not. For most of the categories and for most of the companies and brands. That clearly indicates that consumers are getting more amount against the same amount of money. Or, the relative prices were less than that of a year ago, for many common products.

While the most of brands provided a discount on prices; consumers were also presented with numerous additional volumes or other freebies or buy one get one free type of offers; which essentially indicates more value for the same money.

It is reported that there were about 68000 consumer offers in the FMCG brands in last one year, against about 55000 in the previous year – more than 20% growth in numbers. See the references below – sources: Kantar World Panel, IMRB, The Nielsen Company (for volumetric analysis), Economic times, LiveMint and Hindu Business Line articles. Toilet soaps, biscuits and laundry bars were given maximum promotions – three most important FMCG products for the masses – having products across the price segments.

A flipside of the large numbers of promotions to the brands is that none of the brands stand to gain significant volumes. Largely because almost all the brands in the category provided the offers and discounts and everyone is on the same page! Consumers didn’t require to shift from the preferred brand as her brand was also providing almost the same benefits. So the impact of promotions in the volume, in the short run, was not significant. We need to wait for long run analysis and the data.

So why the companies were so generous to the Indian consumers? If we analyse the GST rates across products in FMCG, and the repeated changes in subsequent months in the tax rates – we see that for about 210 products, the effective tax rates were slashed. Toothpastes, cookies, hair oils, soaps now being taxed at 18% from previous 22%. Premium detergents, personal care products, shampoos etc. are also being taxed at 18% from previous 28%.

The other reasons being sighted is that the commodity prices for many products, including dairy (raw milk) products have reduced (see CPI and WPI numbers) – which should bring down the COGS of many end product and consumers will stand to gain again.

So now the question is – while the benefits passed on to the consumers are enough/ justified or the brands still have rooms to pass on further benefits – given that the tax rates have been cut to a great extent in several premium categories. And GST also have brought in rationalization across the supply chain, including reducing the number of warehouses and ease of implementing trade schemes. These are the questions that will be required to answer in the long run, with more data and time being available. The impacts will also vary across brands – because of the cost efficiency differentials a brand can bring in, or the loyalty it commands from its brand users. Prima facie, we see some more scope of benefits to be passed on to the consumers in the long run, as GST regime bring in more efficiency down the line.

Leave a Reply

Your email address will not be published. Required fields are marked *

*Type the result 7 + 5 =

Our Blogs

Find out what happens when digital intelligence meets digital business

Subscribe to our Newsletter

Please provide your email below. Thank you.

Follow Us on:
Locate Us

Adani Corporate House,
9th Floor, Shantigram,
near Vaishnodevi Circle,
Ahmedabad, Gujarat, 382421.

Technopolis Building,
Street Number 1, BP Block,
Sector V, Bidhannagar,
Kolkata, West Bengal, 700091.

1125 Executive Circle,
STE 130, Irving,
TX 75038.

Download Case Study

Type the result*   7 + 1 =

Download White Papers

Case Study will be mailed to this email address.

Type the result*   8 + 9 =

Download Corporate Brochure

Type the result*   4 + 1 =



Job Type:

Job URL:

Key Skills: