FMCG firms won’t cut price, but increase size of small packs

Consumer goods companies have told tax officials that they cannot reduce the prices of popular low-cost products like Rs 5 biscuits, Rs 10 soaps, or Rs 20 toothpaste packs, even though the Goods and Services Tax (GST) on these items has been cut, moneycontrol.com reported.

The reason is that Indian shoppers are used to these fixed price points, and lowering prices to odd numbers like Rs 18 or Rs 9 would confuse consumers and make transactions inconvenient. Instead, companies told the Central Board of Indirect Taxes and Customs (CBIC) that they will keep the same price but increase the quantity inside the pack. For example, a Rs 20 biscuit pack could now contain more biscuits for the same price.

In simple terms, shoppers will pay the same amount for their favourite small packs, but they might find that the biscuit, soap, or toothpaste inside now comes in a slightly larger size.

Executives from leading FMCG firms explained that this “extra quantity for the same price” approach will pass on the GST benefit without disrupting consumer buying behaviour.

Officials in the Finance Ministry are, however, keeping a close watch. They are considering issuing guidelines to make sure companies do not pocket the savings themselves and that consumers truly benefit, the report added. The GST Council recently announced a major overhaul of the tax system, cutting tax on most daily-use goods to 5%. Earlier, biscuits and similar items were taxed at 18%.

HUL Slashes Prices 

Meanwhile, Hindustan Unilever Ltd (HUL) has reduced prices across some of its most popular products, including Kissan Jam, Horlicks, Lux soap, and Dove shampoo, with the new rates coming into effect from September 22, according to a newspaper advertisement. HUL said fresh stock carrying the revised maximum retail price (MRP) or higher grammage packs is being dispatched to markets. Companies are required to issue at least two advertisements in one or more newspapers about the revision and notify dealers, as well as state and central officials.