Consumer-facing companies including makers of biscuits, Ayurveda products, soaps, and shampoos have asked the government to reduce the goods and services tax rates to help revive demand as the lockdown eases. “With constraints of disposable income, reduction in GST would spur demand of essential category,” said Arup Chauhan, executive director of Parle Products, the country’s biggest biscuit company and maker of Monaco, Hide & Seek and Marie cookies.
Biscuits under Rs 100 a kg are taxed at 18% and are price-sensitive category, 40% by volume, and 30% by value of the overall category. The GST Council, which is expected to meet next month, had slashed tax rates on 200 products including chocolates, toothpastes, shampoos, washing powders and shaving creams to 18% from 28% in November 2017. Industry executives said a further reduction is needed to trigger demand.
“Reduction in GST for basic category from 18% would create a demand stimulus, which is critical to revive the economy,” said Arvind Mediratta, managing director of wholesale retail chain Metro Cash & Carry. The government’s Rs 20 lakh crore stimulus package had focused more on propping up the supply-side with long-term results rather than spurring demand in the short term, industry officials said.