Lower GST rates catapults FMCG to record high

The GST Council has set GST rates for more than 1200 items at its meeting held in Srinagar on Thursday. The GST Council meet outcome has largely benefited the fast-moving consumer goods (FMCG) companies. The tax rate on products like hair oil, soap and toothpaste has been reduced to 18 per cent from the current 22-24 per cent. The decrease in tax rates under GST has made FMCG stocks to hit record high.

The finalization of GST rates had a positive impact on the markets and the gains are expected to continue. About 81% of the goods are likely to be taxed at 18% or below. All capital and intermediate goods will be in the 18% tax slab, which is lower than the current 28%, while sugar, tea, coffee and edible oil will be taxed at 5%.

There are several items of daily use which will be exempted from the GST, including items such as milk, fruits, vegetables, cereals and foodgrains. This may cause some downward movement in the inflation rate post implementation of GST.

On Friday, S&P BSE FMCG index closed at 9627.43, up by 176.12 points or 1.86%.