NEW DELHI: FMCG stocks jumped as much as 7% on Thursday after the GST Council, led by Finance Minister Nirmala Sitharaman, announced a simplified tax structure by eliminating the 12% and 28% slabs. In a move aimed at easing the tax burden on everyday consumers, GST on commonly used items like soap, toothpaste, chocolates, namkeen, and coffee has been reduced to 5%, down from the earlier 12% or 18%.
Additionally, essential food items such as ultra-high temperature (UHT) milk, paneer, and various Indian breads including roti and paratha will now fall under the zero-tax category, compared to the previous 5% rate.
Britannia Industries shares gained up to 7.2% in early deals to hit intraday high of Rs 6,336.95. The shares of Dabur surged up to 6% to Rs 577 and Colgate-Palmolive (India) gained 5% to 2,504. FMCG heavyweights such as HUL, Nestle and ITC also advanced sharply on Thursday morning. Sectoral benchmark index Nifty FMCG surged about 2% in early deals before giving up most of gains as session progressed.
Pranav Haridasan, MD and CEO, Axis Securities said that the government’s move to simplify GST by reducing slabs from four to three is a smart step. Essential and aspirational goods now largely fall under the 5% and 18% brackets, which makes the system simpler and fairer.
“This comes at the right time, as consumption has been muted for several quarters due to inflation and weak demand. By putting more disposable income in people’s hands, GST 2.0 can reignite consumption and set off a multiplier effect across the economy. Some of the key sectors that stand to benefit from this are insurance, FMCG, automobiles, agriculture equipment, cement, consumer durables, apparel, footwear, QSR, and retail,” added Haridasan.
Sunil Agarwal, Co-founder and Chairman of Joy Personal Care (RSH Global) said that the reduced levies will directly benefit consumers and energize the FMCG industry at large. He added that for households, this tax relief eases financial pressure and makes everyday essentials more affordable, while also encouraging higher consumption.
“Rural India has been driving FMCG growth for six consecutive quarters, and this move will further strengthen demand in these price-sensitive markets, even as urban consumption continues to recover.
The sector has already recorded 13.9% value growth, supported by rural demand, urban revival, and the rapid rise of e-commerce, particularly in southern metros. Small manufacturers have also benefitted from easing inflation, and this tax cut will further reinforce that trend,” added Agarwal.
Santosh Meena, Head of Research at Swastika Investmart said that the reduction, especially from the 12% and 28% brackets, is expected to spur consumer demand ahead of the festive season, benefiting sectors like consumer durables, automobiles, and FMCG.
“However, stocks in these sectors have already surged in anticipation. The tax cut supports consumption-driven growth, but its success hinges on companies passing on savings to consumers. Markets will also factor in the long-term impact on government revenue and the broader economy,” added Meena.