The recent Goods and Services Tax (GST) overhaul by the GST Council, headed by Union Finance Minister, Nirmala Sitharaman, has not included detergents and cosmetics in the category of fast-moving consumer goods (FMCG) such as hair oil, soap, shampoos, and toothpaste, which are going to be taxed at as low as 5 per cent.
With detergents and cosmetics remaining under the high 18 per cent tax category with zero savings, industry players say they are concerned.
The new structure of GST, which comes into effect on September 22, will have two slabs of 5 per cent and 18 per cent instead of the current four slabs of 5, 12, 18 and 28 per cent. The move, said the government, is aimed at boosting consumer spending.
FMCG companies say they are ready to pass on the benefits of the duty cuts to consumers even though they will have to face challenges on the existing stock at retail stores, but are flummoxed why taxes on items like hair dye, household insecticides, detergents and cosmetics have not been reduced.
Harpreet Singh, Partner, Deloitte India, said detergents are an equally essential item in every household, and appear to have been inadvertently left out.
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"As a basic necessity for hygiene, their continued higher taxation may stand out as an anomaly. A rate cut for detergents can provide meaningful relief to households, particularly for lower- and middle-income families, as detergent purchases are a recurring monthly expense," he said.
It remains to be seen whether the government will extend the reduction to detergents in the final notification, he added.
Grant Thornton Bharat Partner and Consumer Leader, Naveen Malpani, said the Indian beauty and personal care market is growing at a healthy annual rate of 10-11 per cent.
"A reduction in GST rates on cosmetics could have further accelerated growth in this category, especially for premium products," he said.
A report by Nuvama Institutional Equities said some categories where no change seems to have happened include detergents, hair dye, household insecticides, skin care and cosmetics. Even for paints players, it is status quo.
Abneesh Roy, from Nuvama Institutional Equities, said it’s especially surprising that detergents continue to be taxed at a high 18 per cent even while being a daily consumption item.
"It's very surprising that there are no (GST) cut on detergents," said Roy.
FMCG companies are planning to extend the GST benefits to consumers either through increase in the grammage of packs or by reducing prices of larger packs.
When it comes to cosmetics, though, Malpani said aspirational buying among Gen Z and millennials, an expanding rural consumption, and strong digital influence and channel penetration continue to support demand and category expansion.
"Moreover, the rate cuts on essential personal care items, other consumer goods and broader tax relief are expected to improve disposable incomes, indirectly benefiting discretionary categories such as cosmetics and home care," he said.
Brands in both categories can leverage the opportunity through value-driven offerings, smaller pack sizes, and targeted outreach in emerging consumption hubs, he added.
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