Impact of GST Registration on FMCG Sector

 With a total market size of over US$ 13.1 billion, the FMCG industry in India ranks fourth in terms of economic size. Consumer packaged goods is another name for Fast Moving Consumer Goods (FMCG) products. All consumables that people regularly purchase (apart from food and pulses) fall under this category. Among all the sectors of the Indian economy, FMCG is also one of the ones with the quickest growth. Learn about the Impact of GST registration on FMCG Sector through this article. 

Cost Savings in Logistics

GST's effects on FMCG

The FMCG industry would also profit from GST because it would reduce logistics costs significantly. The FMCG sector presently accounts for 2-7% of overall costs in distribution; after the implementation of GST, this percentage is anticipated to fall to 1.5%.

There will be a decrease in the cost of shipping and storing goods as a result of the GST regime's better supply chain management, tax payment, input credit claim, and absence of CST. It is anticipated that the cost and tax reductions will lower the price of consumer items.

Transfers of Goods Stock

GST will apply to stock transfers outside the State. If stock transfers take place within the State, GST can also apply. It should be noted that the GST registration framework was designed to tax only stock transfers between States, not transfers within States. The GST Valuation Rules further state that the transaction value for stock transfers will be determined by the value of the transferred products.

The price paid or due for the supply of commodities is the transaction value. This clause cannot be put into practise because stock transfers do not involve a consideration. The GST valuation guidelines further provide that the value for the good or service will be taken into account as the transaction value of a good or service of the same kind and quality if the transaction value is not available.

GST on FMCG products

The FMCG sector anxiously awaited the release of the GST rates for each product. The Indian government has released the GST rates for all items falling under the FMCG category. The majority of goods have been grouped into tax brackets as anticipated by specialists in the FMCG sector.

E-COMMERCE, FMCG & GST

Improved infrastructure and living conditions, as well as a greater emphasis on internet shopping, have given FMCGs access to new distribution channels and opportunities. Because internet retailers may offer benefits that traditional retailers cannot, such as doorstep delivery, a wide assortment, and affordable prices, more and more consumers are purchasing the goods they need online.

As businesses reevaluate delivery logistics efficiency to shorten delivery times, the online market for groceries and other consumable products is growing. While the volume of non-consumables may continue to exceed that of consumables, increased transportation efficiency has increased the use of e-commerce platforms for FMCG acquisition.

Taxes on FMCG products have effects on both the vast customer base and business participants because they often contain recurring and daily usage items. This industry was subject to a variety of taxes during the pre-GST registration  era, including excise duty, entry tax, various state VATs, and CST on interstate transactions. Taxes have a cascade impact. 

Additionally, because GST paid throughout the supply chain (including the manufacturing stage) on inputs as well as on input services is accessible for setoff against GST registration on the supply of goods, the setoff of excise and service tax, which increased to the cost, has been eliminated. In reaction to the installation of the GST, businesses started to adjust their rates and prices, which helped the manufacturer by lowering expenses, the distributors by lowering transportation costs, and, of course, the customers by enabling them to purchase goods for less money.

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Moreover, If you want any other guidance relating to GST Registration online, please feel free to talk to our business advisors at 8881-069-069.

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