Two years ago, on 5th June, a catastrophe struck the nation. The Food Safety and Drug Administration withdrew and recalled 9 variants of Maggi noodles. They ordered a stop on production and exports. Before one could realize, Maggi was banned. The instant noodles were off the shelves. The food inspectors delved in to the mystery of ‘dangerously high’ levels of lead and MSG contained in Maggi. Chaos clouded one of India’s most popular Fast Moving Consumer Goods brand, and the country was split in moral essence.
Fast forward to on August 13th 2015.
The frenzy ended as Bombay High Court lifted the ban on Maggi noodles. A few days after the FDA lifted the ban, many people were cheering and celebrating with their first Maggi in a long time. Being an employee of a GST-based firm made me wonder how GST will affect Maggi.
Fast Moving Consumer Goods –
Maggi falls in the category of fast-moving consumer goods (FMCG). For the ones who
weren’t aware about the existence of a term like this, Fast Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) refer to products that
sell quickly, in higher volumes, and have a short shelf life. They are generally cheap.
FMCG include non-durable items like soft drinks, toiletries, over the counter drugs and many other consumables other than groceries and pulses.
After seven articles and a comprehensive research, I have unearthed quite a few things about how GST has impacted FMCG.
GST rates for FMCG products –
Different goods have been placed in different slabs.
Consumer Impact –
For starters, 81% of all items have become cheaper. FMCG goods were previously taxed at 22-24%. This rate has come down to 18% and the major players of the industry have welcomed this. Since GST subsumes all previous taxes like CST, CVD, SAD, etc., the FMCG manufacturers can now claim Input Tax Credit which has led to a downward trend in prices. In the 23rd GST Meeting, the Council revised the GST rates for almost 180 goods. Following this reduction in prices, there is an increase in demand for the products.
Overall, much to our relief, FMCG companies have benefited with the onset of GST.