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T
he initial cheer over lower tax rates will have to be unwillingly passed on to becoming cheaper after the implementation of the
for some mass-consumption consumers, to sustain profitable growth for GST. The BSE index for the FMCG sector gained 1.9%
consumer goods proved to be short- our business. to close at 9,627 even as the benchmark indices
lived. The detailed goods and serv- The rates declared for IT (information closed flat on Thursday. On the other hand, all the
ices tax (GST) rate of 1,211 items that came technology) products seem on the higher other major sectoral indices closed in the red.
late on Thursday night was like the sting in side. Clarity is awaited on GST on differential Among the FMCG companies, shares of Colgate-
the tail, with major consumer goods firms duty on imports and local manufacturing, on Palmolive India soared 3.6% the best by any
expressing concerns that the introduction services and treatment of area-based exemp- company that is a part of the FMCG index. Shares of ITC
of the new tax regime would lead to price tions, said Rajeev Jain, group chief financial and Emami closed 2.8% and 2.4% higher. This rally of
increase of most discretionary items. That officer (CFO), Intex Technologies. ITC shares also helped the benchmarks recover from However, shares of consumer durables witnessed a
includes durables, mobile handsets, aerated Indian Beverage Association said, We the selling in the broader markets. ITC has a weight of fall as the GST rate for the sector is higher than the cur-
drinks and sanitaryware, among others. are extremely disappointed with sweetened around 11.5% in the Sensex. rent tax slab. The BSE Consumer Durables Index lost one
While the rates for most fast moving con- aerated water and flavoured water being Market participants said GST will provide much- per cent to close at 15,475.71. Similarly, the index for
sumer goods items were in line with expec- placed in the highest tax slab rate of 28 per needed impetus for FMCG firms which are yet to Consumer Discretionary Goods & Services also lost one
tations, discretionary spending might be hit cent, combined with an additional cess of recover from the impact of demonetisation. The per cent during the session. Shares of Crompton Greaves
in a market that already faces a slowdown. 12 per cent. The effective tax rate of 40 per BSE FMCG Index has gained little more than 20% in were down 3.8% while shares of Symphony and
Prices of TV sets, refrigerators, washing cent on these products under the GST regime the current calendar. Whirlpool of India lost 1.8% and 1.4%, respectively.
machines and air conditioners might see is against the stated policy of maintaining
price increases of 1.5-4 per cent in the com- parity with the existing weighted average
ing days. Effective tax rates for these items tax. This will have a negative ripple effect S&P BSE 15,800 S&P BSE 9,900
have been set at 28 per cent, up from the 24- and hurt the entire eco-system of farmers, CONSUMER 15,637.91 FAST- 9,627.43
26.5 per cent at present. Seniors at major retailers, distributors and bottlers. 15,600 9,750
durables makers say it is imperative that they Coca-Cola India gets a little over DURABLES 15,475.71 MOVING
pass on the additional burden to consumers. 60 per cent of its ~10,200-crore yearly sale 15,400 CONSUMER 9,600
They were, they say, already finding it diffi- from aerated drinks. PepsiCo generates near-
cult to absorb a rise in material costs for TV ly 45 per cent. However, a 12 per cent rate on 15,200
GOODS 9,451.31 9,450
panels and compressors. fruit juices and milk-based drinks is a May 18 2017 May 19 May 18 2017 May 19
Under the new GST tax slab, a price rise breather; the two have been expanding their
of 4 per cent and upwards can be expected portfolio outside of colas for some time. Most CONSUMER DURABLES FAST-MOVING CONSUMER GOODS
for consumer durables. The trade partners staple consumer goods such as dairy prod- BSE price in ~ BSE price in ~
though might have a slight impact due to ucts, meat derivatives, breakfast cereals and
input tax but they can recover by increasing processed vegetables have been kept under May 19,2017 % chg* May 19,2017 % chg*
their selling price, said Manish Sharma, the 18 per cent or lower tax brackets, in line GAINERS GAINERS
president and chief executive at Panasonic with expectations, companies said. Some PC Jeweller 450.35 0.57 Colgate-Palmolive 1,014.55 3.59
India and South Asia. items have been taxed higher. Videocon Ind 100.45 0.40 Tata Coffee 134.10 3.07
At a time when the government is We are disappointed with the decision to LOSERS Jay Shree Tea 103.45 3.04
aggressively pushing for digitisation, where levy 12 per cent GST on ayurvedic medicines
smartphones and value added feature and products, which we feel will be adverse
Crompton Greaves Con Ele 222.70 -3.82 ITC 285.90 2.82
phones are expected to play a central role, the for the category, at a time when the govern- Symphony 1,417.85 -1.84 Emami 1,107.10 2.46
tax on these would increase. The effective ment has been talking about promoting tra- Whirlpool of India 1,174.30 -1.43 LOSERS
rate on such items is presently eight to nine ditional Indian alternative medicine, said TTK Prestige 6,352.65 -1.02 Zydus Wellness 810.40 -3.08
per cent; under GST, this is set to rise up to Lalit Malik, CFO, Dabur India. Rajesh Exports 634.70 -0.67 Gujarat Ambuja Exports 131.55 -3.06
18 per cent. Considering smartphones at Sanitarywares and bathroom products Nilkamal 1,986.45 -0.45 Ess Dee Alum 47.00 -2.99
par with consumer durable items is incor- will be taxed at 28 per cent; the current rate
rect, said Syed Tajuddin, chief executive is 24 per cent. Driving a luxury car and going
Blue Star 646.65 -0.27 Radico Khaitan 125.45 -2.68
officer, Coolpad India. to the toilet will cost you the same, said K E Titan Company 471.10 -0.08 Advanced Enzyme Tech 1,889.50 -2.46
Pardeep Jain, MD at Karbonn Mobiles, Ranganathan, MD, Roca Bathroom Products. *Change over previous close Compiled by BS Research Bureau