GST Transition Issues Persist for FMCG Players Through October
Issue: To assess how long the short-term disruptions and compliance challenges related to the GST 2.0 rate rationalization persisted in the Fast-Moving Consumer Goods (FMCG) sector’s supply chain, particularly regarding inventory and pricing adjustments.
Facts:
- GST 2.0 came into effect on September 22, 2025, slashing tax slabs and rates on many consumer goods.
- Ahead of the implementation (Q2 FY26), traders focused on liquidating old-priced stocks and cut back on loading new stock, causing a short-term sales disruption.
- FMCG companies subsequently introduced product packs with new lower MRPs or increased grammage in accordance with the lower tax slabs.
Decision:
Leading FMCG companies confirmed that the GST transition-related impact across the supply chain, particularly issues related to old inventory and new pricing, continued throughout the month of October, and had not fully stabilized by the end of the month.
Key TakeDowns:
- Inventory Holdover: The core issue was the huge volume of old-price inventory still sitting in the distribution pipeline (estimated at about 30 days at retail and 20 days with wholesalers/distributors), which needed to be flushed out before the new pricing streamlined the market.
- Disruption Impact: Dabur India estimated the transitional GST impact at ₹100 crore, which was 3-4% of its Q2 revenue. The disruption particularly impacted short-term trade volumes (loading of new stocks).
- Expected Stabilization: Companies anticipate normal trading conditions and market recovery to begin by early November or December, once the old-priced stock has been completely cleared and new pricing is fully absorbed across the trade channel.
- Gradual Demand Recovery: While the GST reduction is a long-term positive for consumer demand, HUL noted that the benefits of increased disposable income are expected to manifest gradually rather than through an immediate acceleration of demand.
Source :- The Hindu Business Line