Introduction
The implementation of GST 2.0 on September 22, 2025, marks a
transformative shift in India’s tax structure, simplifying rates into two
primary slabs (5% and 18%) and exempting essential items. While this overhaul
aims to boost consumption and reduce costs for consumers, Fast-Moving Consumer
Goods (FMCG) companies face immediate logistical hurdles, particularly
concerning pre-printed packaging materials. With packaging waste worth over
₹2,000 crore at risk, the industry has sought urgent solutions to balance
compliance, cost-efficiency, and sustainability. The government’s
intervention—allowing MRP revisions on unsold stock until December 31,
2025—offers a lifeline, but challenges persist
The Packaging
Predicament: Why old Stock Matters
1. Inventory
Overhang and Pre-Printed MRPs
FMCG companies typically maintain 2–3 months of inventory across their
supply chains, including millions of units with packaging materials printed
under the old GST rates. Products like biscuits, toothpaste, hair oil, and
dairy items, now shifted to lower tax slabs (e.g., from 18% to 5%), require
updated Maximum Retail Prices (MRPs) to reflect reduced costs.
However, reprinting packaging for existing stock would necessitate
discarding pre-printed materials, causing:
Colossal waste of resources (packaging accounts for 10–15% of product
costs).
Financial losses exceeding ₹2,000 crore.
2. Supply Chain
Disruptions
Distributors and retailers, cautious about holding high-taxed inventory,
have slashed inventory levels to 5–6 days and halted fresh purchases until new
MRPs are clear. This threatens short-term disruptions, including:
Stock-outs during the festive season.
Trade friction due to ambiguous pricing during the transition.
Government’s
Solution: Sticker- Based MRP Revisions
To ease the transition, the Department of Consumer Affairs permitted
manufacturers to revise MRPs on unsold stock using stamping, stickers, or
online printing until December 31, 2025, provided:
The original MRP remains visible.
The revised price strictly reflects GST changes (no overwriting).
Companies advertise revised prices via newspapers and dealer
notices.
Industry Response
Practical Relief: Executives welcome this as a "much-needed
operational flexibility" to avoid waste and reduce compliance
burdens
Short Window: The December deadline pressures companies to clear stocks
quickly.
Persistent
Challenges and Industry Adaptations
Despite government relief, FMCG companies grapple with:
1. Logistical
Complexities
Manual Re-stickering is impractical for millions of units.
Grammage Adjustments: Companies seek
clarity on passing benefits via increased quantity (e.g., retaining ₹10 price
points with more products).
2. Distributor
Uncertainties
Trade bodies demand credit notes, price protection, and inventory
adjustments to offset losses.
Distributors fear being saddled with old stock unless manufacturers
actively support transitions.
3. Consumer
Communication
Firms like Amul and Parle plan ad campaigns and discounts to inform
consumers about new prices on old stock.
Anti-Profiteering Risks: Failure to pass benefits may attract penalties
under the Consumer Protection Act.
Strategies for a
Seamless Transition
1. Phased
Implementation
Use sticker-based revisions for immediate relief while gradually
introducing new packaging.
Leverage promotional offers (e.g., "buy one-get one") to pass
benefits without repackaging.
2. Technology and
Transparency
Digital tracking to monitor stock levels and ensure compliance.
Clear communication with distributors via notices and
advertisements.
3. Policy Advocacy
Extend the December deadline for categories with high inventory.
Simplify HSN code classifications to avoid category confusion (e.g.,
soap vs. detergent bars).
The Bigger Picture:
Long- term Gains
While the transition is fraught with short-term challenges, GST 2.0
promises:
Boosted Consumption: Lower prices on daily essentials may increase
demand by 6–7%.
Formalization Benefits: Simplified compliance could expand the tax base
and attract investment.
Sustainability: Avoiding packaging waste aligns with environmental goals.
Conclusion
GST 2.0 is a landmark reform for India’s economy, but its success hinges
on pragmatic execution. The government’s sticker-based MRP revision policy
provides critical breathing space for FMCG companies to navigate packaging
challenges. However, industry-government collaboration—through clearer
guidelines, extended deadlines, and transparent communication—will be essential
to ensure a smooth transition that benefits consumers, businesses, and the
economy alike. As Parle Products’ Mayank Shah notes, "We intend to pass on
full benefits, but need cost-efficient solutions without wastage". The
next few months will test the resilience of India’s FMCG sector, but also
highlight its adaptability in turning tax reforms into tangible gains.
Disclaimer: The information provided on MoneyWiseMind is for educational and informational purposes only. It is not intended to be financial advice, and you should not rely on it as such. Before making any financial decisions, you should consult a licensed financial advisor.
