NewsCorporate ActionsGoldman Sachs: FMCG and Footwear Stocks Poised to Gain from Proposed GST SimplificationGoldman Sachs: FMCG and Footwear Stocks Poised to Gain from Proposed GST Simplification
The GST Council is set to discuss a simplified two-rate structure of 5% and 18% on September 3-4 in New Delhi. This could benefit various FMCG and retail companies. In the FMCG sector, companies like Nestlé, Emami, and Dabur may gain if certain products move to a lower tax slab. Britannia, Varun Beverages, and Tata Consumers could benefit if packaged food products shift to 5% GST. A broader reduction in daily use FMCG products could advantage HUL, GCPL, Marico, and others. In the footwear sector, Bata and Metro Brands might see significant benefits if GST is reduced on footwear priced up to Rs 2,500. Apparel companies like Trent and Page Industries may see some benefits. These changes could improve consumer purchasing power, narrow the price gap between branded and unbranded goods, and enhance competitiveness for organized players.
*this image is generated using AI for illustrative purposes only.
The Indian consumer goods and retail sectors are bracing for potential changes as the GST Council prepares to meet on September 3-4 in New Delhi. The council will discuss a proposal for a simplified two-rate GST structure of 5% and 18%, which could phase out the current 12% and 28% slabs. Goldman Sachs has identified several companies that stand to benefit from these potential tax reforms across various scenarios.
FMCG Sector: Potential Winners
The FMCG sector could see significant benefits from the proposed GST changes:
12% to 5% Reduction
- Companies like Nestlé, Emami, and Dabur could benefit if products such as instant noodles, juices, and Ayurvedic items currently taxed at 12% move to the 5% slab.
Packaged Food Products
- If all packaged food products are shifted to the 5% GST rate, companies like Britannia, Varun Beverages, and Tata Consumers could see gains.
- This would impact products such as biscuits, packaged water, malt beverages, chocolates, and ice creams.
Daily Use FMCG Products
- A broader reduction from 18% to 5% on daily use FMCG products would benefit several categories and companies:
- Soap, detergent, shampoo, toothpaste, and hair oil categories
- Benefiting companies: HUL, Britannia, GCPL, Marico, Nestle, Varun Beverages, Tata Consumers, Emami, and Dabur
Footwear and Apparel Sector: Potential Impact
Footwear
- Reducing GST to 5% on footwear priced up to Rs 2,500 would significantly benefit companies like Bata and Metro Brands.
- Notably, Bata has 60% of its sales below Rs 2,500, which are currently taxed at 18%.
Apparel
- Players like Trent and Page Industries would see some benefits, albeit to a lesser extent.
- Approximately 70-75% of their sales are already under Rs 1,000 and taxed at 5%.
Broader Implications
Goldman Sachs notes that the potential GST rate reductions could have several positive effects on the market:
- Improved consumer purchasing power
- Narrowed price gap between branded and unbranded goods
- Enhanced competitiveness for organized players
The proposed changes in the GST structure could reshape the competitive landscape in the FMCG and footwear sectors. As the GST Council meeting approaches, industry stakeholders will be closely watching for any decisions that could impact their businesses and the broader market dynamics.
It's important to note that these are potential scenarios based on the proposed GST changes. The actual impact will depend on the final decisions made by the GST Council in their upcoming meeting.
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