High Court emphasizes that GST benefits must reach end consumers without indirect adjustments or promotions
| Photo Credit:
FRANCIS MASCARENHAS
The Delhi High Court’s recent order to pass on the benefits of GST rate reduction to consumers through price cuts and not through grammage increase has set the FMCG industry into a tailspin, especially about small packs priced at popular price points.
In response to GST rate cuts enforced last month, many FMCG companies passed on price reduction even on smaller packs priced at ₹5 or ₹10, leading to odd price points being visible on retail shelves, such as ₹4.50 and ₹9. But other companies cut prices on large packs and increased grammage on small packs, citing coinage-related challenges.
“In line with the recent GST rate rationalisation, we are passing on the benefits to our consumers. Trade partners have been communicated to ensure that the benefits of GST rate reductions are passed on to the end consumers. The issue of grammage is an ongoing matter in the Supreme Court and is sub judice,” a HUL spokesperson said.
Angelo George, CEO, Bisleri International, said that the company has reduced prices to fully pass on the benefits of the GST across the entire range, including small packs at popular price points.
Magic pricing
Flagging implementation issues faced by FMCG companies, Manish Mishra, Partner & Head – Indirect Tax, JSA Advocates & Solicitors, said: “There are practical considerations that need to be factored for the FMCG sector where price reduction may not always be feasible given that the goods on offer may be high on volumes but low in terms of per unit price.”
Industry insiders said the “magic price” ranges in small packs — ₹5, ₹10 — are based on a logical and well-thought-out strategy related to consumer behaviour. They believe that while companies have scrambled to pass on the benefits to the consumers for the moment, it is only a matter of time before they revert to “magic pricing”.
Transparent pricing
However, Manoj Mishra, Partner, Grant Thornton Bharat, said after the High Court order, the industry cannot hide GST-driven price reductions behind promotions, freebies, or increased grammage. “Coming at a time of recent GST rate changes and the festive season, when many businesses rely on bundled offers or value additions, the Court makes it clear that only transparent price cuts fulfill compliance obligations,” he added.
“The issue of coinage and inconvenience to the trade cannot be a ground to overcome a statutory provision mandating a reduction in prices,” noted Kamal Aggarwal, Senior Advisor, Singhania & Co.
Published on October 3, 2025