The Fast-Moving Consumer Goods (FMCG) distributors' association has written to the Union Finance Minister raising concerns about potential supply chain disruptions from the upcoming GST rate changes. The association has urged the government to issue clear guidelines on pricing, stock adjustment, and input tax credit (ITC) to ensure a smooth transition.
The development comes after the Prime Minister, in his Independence Day address, announced GST reforms as a "Diwali gift" to reduce the tax burden on the common man. Reports suggest that the 12% GST slab is likely to be scrapped, with many essential FMCG items expected to move into the 5% tax bracket.
Packaged Foods Likely to See Tax Relief
Several everyday FMCG products currently taxed at 12% could benefit from the shift, including butter, ghee, pickles, jams, nuts, soya milk, fruit juices, tooth powder, namkeens, savouries, chips, bhujiya and snack foods. Industry watchers say consumers will benefit from reduced prices, but trade stakeholders are concerned about how existing stock and margins will be managed.
Distributors Raise Red Flags
In its letter, the All India Consumer Products Distributors Federation (AICPDF) highlighted that large volumes of stock are already in circulation and at retail counters."Sudden rate changes, without directives, may affect margins, create disputes and confuse consumers. We urge the issuance of clear guidelines to manufacturers on pricing and stock adjustment," the letter said.
The federation also warned that while rate cuts may benefit end consumers, there is a risk of unequal distribution of benefits across the supply chain, which could squeeze margins for distributors and retailers.
ITC and Transition Challenges
The AICPDF stressed the need for a proactive framework on input tax credit (ITC) for closing stock, pointing out that many distributors and retailers could face financial strain if not given rightful credit. "We request a proactive framework to ensure rightful credit of ITC so that trade partners are not unfairly burdened," it added.
A company executive, speaking on condition of anonymity, noted that the cost burden of transition would largely fall on companies, which would have to absorb or adjust the differential until stock normalises.
Plea on Aerated Beverages
The association also flagged concerns about the classification of aerated beverages, which currently fall in the highest GST slab. It argued that these products are often consumed at low price points of Rs 10 and Rs 20, mostly by lower-income groups. Treating them as sin goods, the letter warned, could dampen demand in this segment.
Awaiting Clarity from the GST Council
While consumers are expected to gain from lower taxes, distributors insist that government guidelines are critical to ensure smooth execution of the reforms and to prevent disputes during the transition. The Finance Ministry and GST Council are expected to issue directives once the new rate structure is finalised.
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