Consumer-facing companies including makers of biscuits, ayurveda products, soaps and shampoos have asked the government to reduce the goods and services tax rates to help revive demand as the lockdown eases.
“With constraints of disposable income, reduction in GST would spur demand of essential categories,” said Arup Chauhan, executive director of Parle Products, the country’s biggest biscuit company and maker of Monaco, Hide & Seek and Marie cookies. Biscuits under Rs 100 a kg are taxed at 18% and are price-sensitive categories, 40% by volume and 30% by value of the overall category.
The GST Council, which is expected to meet next month, had slashed tax rates on 200 products including chocolates, toothpastes, shampoos, washing powders and shaving creams to 18% from 28% in November 2017. Industry executives said a further reduction is needed to trigger demand.
“Reduction in GST for basic categories from 18% would create a demand stimulus, which is critical to revive the economy,” said Arvind Mediratta, managing director of wholesale retail chain Metro Cash & Carry.
The government’s Rs 20 lakh crore stimulus package had focused more on propping up the supply-side with long-term results rather than spurring demand in the short term, industry officials said.
Companies making ayurveda-based products such as Dabur and Baidyanath have sought a GST reduction to 5% from 12%, given that the government itself is pushing the consumption of ayurveda-based foods to boost immunity.
Dabur’s chief executive Mohit Malhotra said a uniform 5% GST for the entire ayurveda product and medicine range would spur much-needed demand.
“A uniform 5% GST would help popularise ayurvedic products, which are gaining acceptance among consumers because of their immunity-building properties,” Malhotra said.
Presently, 5% GST is levied on classical ayurvedic medicines, which account for 20% of the category. All other ayurvedic products fall under proprietary and over-the-counter categories, which attract GST of 12%.
In a report released late last month, market research firm Nielsen slashed its growth outlook for the fast-moving consumer goods sector to 5-6% for 2020, lower than its earlier projection of 9-10%.
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