FMCG Firms Say GST Cut on Mini-Packs Will Be Passed Through Bigger Sizes, Not Lower Prices

Fast-moving consumer goods (FMCG) companies have informed the Central Board of Indirect Taxes and Customs (CBIC) that they cannot directly reduce the retail prices of low-value packaged goods following the recent cuts in Goods and Services Tax (GST). Instead, firms plan to adjust pack sizes at fixed price points such as ₹5, ₹10, and ₹20, which remain psychologically important for Indian consumers.

Why Companies Won’t Cut Prices

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Executives explained that a straight reduction in maximum retail price (MRP) after the GST cut would disrupt the well-established price bands. For instance, a ₹20 pack of biscuits that earlier included 18% GST would fall to ₹17.80 after September 22, once the tax is reduced to 5%. Industry leaders argue that Indian consumers strongly identify with round-number price points, making odd MRPs unattractive in the mass market.

To address this, companies are planning to maintain current MRPs while proportionally increasing the volume of the packaged item. “What we can do is increase the size of the ₹20 biscuit pack, rather than change its price,” one senior FMCG executive told Moneycontrol.

Industry Voices

Rishabh Jain, CFO of Bikaji Foods International, confirmed that the company would implement “grammage increases” in impulse packs to ensure consumers benefit from lower tax rates. Impulse packs, which are designed to encourage unplanned purchases, are particularly sensitive to size and price adjustments.

Meanwhile, Dabur India CEO Mohit Malhotra stated that firms would “definitely pass on GST rate cut benefits to consumers,” adding that such measures are expected to boost demand.

Experts agree, pointing out that value delivery at set pricing points is probably going to continue to be the best course of action.  "Instead of experiencing drastic price fluctuations, we anticipate that ₹5 and ₹10 packs will provide customers with more quantity," stated Namit Purit, Managing Director & Senior Partner at BCG.

Government’s Position

Officials in the Finance Ministry have indicated that guidelines may be issued to prevent any unintended profiteering. Currently, there is no formal mechanism in place to ensure rate cut benefits are passed on. However, sources suggest the government is open to introducing one if required.

The GST Council, in its 56th meeting, recently simplified the indirect tax regime by adopting a standard rate of 18% and a merit rate of 5%, with a 40% de-merit rate for select items. Most daily-use essentials, including biscuits, soaps, and toothpaste, now fall under the 5% slab.

Conclusion

While FMCG companies are not cutting sticker prices, consumers are expected to gain through larger pack sizes at existing price points. This approach ensures that psychological pricing structures remain intact while also delivering the benefits of GST rate cuts to households.