The biggest tax reform since the liberalization and privatization in India “GST” got green signal on 3rd of August by the upper house and finally by the lower house on 8th of August after a long and intense meetings and debates between states, political parties and industry bodies.
The central government is planning to roll out GST in the next financial year commencing from April 1, 2017. The standard GST rate would be 18 % including 1 % additional tax for interstate supply of goods to compensate the losses of state revenue.
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The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to US$ 74 billion in 2018. Food products is the leading segment, accounting for 43 per cent of the overall market. Personal care (22 per cent) and fabric care (12 per cent) come next in terms of market share.
In spite of many driving factors like rising income level, enhance awareness regarding brands, desire to experiment with brands, evolving customer life style, growth of modern trade, availability of online channels for shop etc. , this industry is experiencing sluggish growth rate at recent due to late arrival of monsoon, higher inflation rate and reducing demand trend in rural areas.
So the FMCG sector is very curiously awaiting for the applicability of goods and service tax (GST) which will bring significant change in the traditional supply chain structure. Currently industry players are holding depots, warehouses and carrying and forwarding agents to avoid 2 % CST or it’s better to say to avail input tax credit. The traditional supply chain has been designed by keeping the tax benefits in mind.
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