Proposed GST Rate Cuts on Personal Care and Food Items: A Boost for Consumers and Industry

Union Government Proposes Major GST Cuts on Personal Care and Food Items Ahead of Key Council Meeting

In a significant move aimed at boosting consumer spending, the Union government has proposed slashing the Goods and Services Tax (GST) rate on personal care items from 18% to 5%. This announcement comes just ahead of the crucial GST Council Meeting scheduled for Wednesday, where further discussions on tax reforms are expected.

Sources indicate that essential oral care products—including toothbrushes, toothpastes, tooth powders, and dental floss—along with skin and hair care items such as soaps, shampoos, shaving creams, and after-shave lotions, will benefit from this reduced tax rate. Mohit Malhotra, CEO of Dabur India, expressed optimism about the proposal, stating, “This is without doubt a significant development and something the FMCG industry had been asking for some time. If formalized, it will give a leg-up to consumption.”

Food Items Under Review

In addition to personal care products, the government is also considering substantial cuts on food items. Commonly consumed goods like loose paneer, khakhra, pizza bread, chapati, and roti may soon be exempt from GST altogether. Ultra-high temperature (UHT) milk is also on the list for a potential nil GST rate.

Ready-to-eat foods, including parathas and other Indian breads, currently taxed at 18%, are also likely to see a complete exemption. Experts believe these changes will significantly benefit households and small food vendors alike.

Moreover, the government is pushing for a reduction in GST from 12% to 5% on several essential food items, including butter, jams, snacks, biscuits, edible oils, and packaged drinking water. Such reductions could lead to lower prices for consumers, particularly for higher-priced stock-keeping units, while smaller packs may see an increase in quantity.

Industry Reactions and Consumer Impact

Industry executives from companies like Emami, Marico, and ITC have expressed optimism about the proposed GST cuts. However, some have raised concerns regarding the exclusion of skin creams from the list of products eligible for the reduced rate, highlighting their importance in daily grooming routines across both urban and rural demographics.

A top executive from a food company noted the challenges in adjusting prices for low-unit packs priced at Rs 5 and Rs 10, citing potential coinage issues. However, he suggested that companies might opt to increase the quantity of these smaller packs while reducing prices for higher-priced items.

Personal care companies are particularly hopeful that the inclusion of their products in the 5% GST slab will simplify pricing strategies, allowing them to treat low-unit packs similarly to larger ones. Over the years, many firms have aggressively marketed smaller packs to enhance accessibility, and this tax reduction could further support that strategy.

As the GST Council Meeting approaches, all eyes will be on the government’s final decisions, which could reshape the landscape of consumer goods and food products in India, potentially leading to increased consumption and economic growth.