FMCG GST cut impact: Firms seek government nod to sell existing stock; aim to avoid Rs 2,000 crore packaging waste

Consumer goods companies have urged the government to allow them to sell products with existing packaging at a reduced price once new GST rates come into effect on September 22, aiming to avoid wastage of packaging material worth over Rs 2,000 crore.In letters sent via industry bodies to the finance ministry and department of consumer affairs, companies highlighted that they hold two to three months’ inventory across the supply chain, running into millions of items, ET reported. They proposed informing consumers about the new prices through advertisements, website updates, and distributor notices. “Majority of the packaging materials are pre-printed with the prevailing MRP.

In order to avoid colossal waste…manufacturers should be allowed to exhaust pre-printed material with existing MRP,” one letter read, as per ET. Industry executives said they are yet to receive a response from the government.The recent GST overhaul saw steep cuts on most consumer goods, with taxes on butter, cheese, and confectionery reduced to 5% from 12%, and on chocolates, biscuits, cornflakes, coffee, ice-cream, bottled water, hair oil, soaps, and toothpaste to 5% from 18%.

Mayank Shah, vice-president at Parle Products, was quoted by ET as saying, “While we intend to pass on the full tax cut benefits through lower pricing, we are working on how to implement it cost efficiently without wastage.” Similarly, Amul noted challenges for its retailers under the composite GST scheme, saying that immediate consumer-level reflection of the benefits will be difficult. The dairy brand plans to advertise the reduced prices and offer discounts to ensure consumers benefit even from older stock.To simplify billing and maintain transparency, firms are also advocating reintroduction of rounding off MRPs to the nearest rupee or 50 paise, and recognition of promotional offers such as “buy one-get one” or increased grammage as valid ways to pass on tax cuts. Packaging typically accounts for 10–15% of the product cost depending on category and brand.While most FMCG products, including hair oil, soap, face powders, shampoos, toothbrushes, and toothpaste, were moved to the 5% GST slab, essential items like detergents and certain cosmetics remain at 18%, raising concerns among industry players. As per news agency PTI, industry experts also highlighted that rate cuts on personal care and consumer goods could boost disposable incomes and indirectly benefit discretionary categories like cosmetics and home care. Brands are expected to leverage the opportunity through value-driven offerings, smaller pack sizes, and targeted outreach in emerging consumption hubs.