Impact of goods and service tax on FMCGs

on GST

1. Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG) PRADYUMNA P PES3UG20BC267 Dr KOTI Lecturer N KRISHNAN Chartered Accountant

2. Table of content Sl. No. Contents of Research Presentation 1 Problem Statement 2. Significance of Research 3. Research Questions and Objectives 4. Literature Review Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG)

3. Problem Statement Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG) This research focuses on the impacts of GST on the companies in the FMCG sector. Research paper studies the variations in the profit, sale, purchases, tax and share prices of the FMCG companies pre and post GST. Under pre GST regime, maximum FMCG products were taxed at rates ranging from 22 percent to 24 percent for example, detergents were taxed at the rate of 23 percent, shampoos and beauty preparations were taxed at the rate of 24 percent to 25 percent, tax on sanitary towels and napkins was about 10 percent to 11 percent, tax on some daily use FMCG products like paneer, ghee, cheese, butter and milk was about 3 to 5 percent. Below are the negative impacts of GST on FMCG Transitional credits Earlier, FMCG companies had to set up units in different states to trade within them. The companies also received area-based exemptions on tavs Therefore, FMCG companies had invested heavily in these states to open factories. However, with the introduction of GST, there's a bit of ambiguity regarding tax refunds to these players.

4. 2. Frequently changing rates In November 2017, tak religged on 200 FMCG goods were announced by the GST Council. The lack of clarity in tax treatment has led to amena confusion for various FMCG goods. For example, there is obscurity on applicable taxes on a buy one-get one free product it is also uncar how FMCG companies must apply promotional schemes. 3. Anti-profiteering issues The transitional credits and frequent changes in tax rates have given rise to anti-profiteering issues in the FMCG sector. Hence, companies have not been able to pass the benefits to customers directly, in addition, there continues to be ambiguity on how to compute and determine the manufacturer's profit.Given the positives and negatives of GST, it is a mixed bag for the FMCG sector. Increased clarity on taxes on promotional activities, constant tax rates and precise computation of tax and profit can make GST even more helpful for the growth of the FMCG sector.

5. Significance of the study Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG) In an ocean of volatile industries, the FMCG industry represents an island of stability during times of economic uncertainty. Among the various industries that characterize the modern global economy, the Fast-Moving Consumer Goods Industry is amongst the most resilient to economic shocks. Unlike other industries, the FMCG sector is not prone to mass layoffs or substantial dips in profit when the economy slows down. This is due to the nature of the goods themselves. For a developing country like India a sector like FMCG which does not get affected by economic stability is to be focused on. So, it is important to analyze the impact of a big tax reform in the country with respect to the 4th largest sector of the Indian economy.

6. Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer-packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. FMCG is also one of the fastest growing sectors among all the sectors in the Indian economy. FMCG segment is the fourth largest in the Indian economy. For most segments within the FMCG spare, GST brings good tidings on the back of lower tax incidence when compared to the total tax paid pre – GST. In this sector GST would have an impact on the pricing, working capital, contracts with vendors and customers etc. The sale of retailers, wholesalers and the monthly budget of common people regarding fast moving consumer goods (FMCG) should have an impact of GST. Moreover, the concept of GST awareness among common man is an important matter to be analyzed. FMCG goods have faced an increased rate of tax after GST certain big players like Nestle ,HUL and P&G have been impacted by GST.

7. Research Objectives Research Questions 1 . What is the biggest supply chain issue facing the FMCG industry? 2. What are the factors which influence consumer Behaviour for FMCG products? Research objectives To understand the concept of GST. To obtain a comprehensive overview of consumer’s, wholesaler’s and retailer’s awareness and perceptions of GST. Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG)

8. Literature Review Impact of Goods and Service Tax(GST) on Fast Moving Consumer Goods (FMCG) Sl. No. Research Article Title (Author1 Last Name, Author2 Last Name, Year) Name of Journal, Vol No (Issue No), pp XXX-XXX Your summary / Variables / Method / scope of research 1 “GST AND ITS PROBABLE IMPACT ON THE FMCG INDUSTRY IN INDIA” Dr Mohan Kumar, CA Yogesh Kumar, 2017 International journal of research in finance and marketing. Scope of research - primary 2 “A STUDY ON PERSPECTIVE IMPACT OF GST ON FMCG SECTOR IN INDIA” R Hiremani Naik, Sudina TA 2017 International journal of research in Business studies. Method used - hypothesis

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