The GST Price War: FMCG Companies and Distributors Blame Each Other Over Unpassed Benefits
The Blame Game Over Base Prices
A dispute has erupted over the failure to fully pass on GST benefits to consumers for certain Fast-Moving Consumer Goods (FMCG) products, particularly in low-unit packs (₹20 and below). While some FMCG companies attribute the lapses and delays to the distributors’ end, distributors allege that some large brands have selectively increased the base prices of certain packs, effectively nullifying the tax reduction for consumers.
Transitory Gaps vs. Price Manipulation
FMCG executives, including those from HUL and Colgate-Palmolive, maintain that all benefits are being passed on (either through price reduction or increased grammage/volume) and any gaps in new packaging and pricing are transitory. However, government officials, citing complaints of raised base prices, plan to initiate action against erring brands and e-commerce platforms, confirming that the law contains provisions to do so. The Central Consumer Protection Authority (CCPA) has forwarded nearly 2,000 complaints to the CBIC for investigation.
Practical Challenges and Legal Scrutiny
Companies cite “practical difficulties” in dropping prices for popular low-unit packs (like ₹1 packs), leading them to increase product grammage instead. However, the Delhi High Court previously ruled that increasing quantity without reducing the Maximum Retail Price (MRP) after a GST cut amounts to “deception,” as it defeats the purpose of making products more cost-effective for consumers.
Source :- Economic Times