While most categories such as hair oil, soap bars and toothpaste will be taxed at 18% under GST as compared with the current rate of 28%, and may therefore undergo a price revision, others such as processed food, ghee, soft drinks, white goods and mobile phones are expected to become dearer. For instance, the Rs 20,000-crore detergent category will be taxed at 28% under GST compared with 22% earlier. “Tax on ghee will go up from 5% to 12%,” said Meghnad Mitra, CFO of Mother Dairy Fruit & Vegetable.
Similarly, taxes on processed foods will increase from around 12% to 18%. Cola makers are worried too that they will have to pay a total tax (including cess) of around 40% on aerated beverages. Earlier, each state levied its own taxes, therefore the weighted average was much lower.
Even processed foods, which includes ready-to-eat snacks will now be moved into the tax bracket of 18% from around 12%, at present. Piruz Khambatta, CMD of Rasna, said, “Prices of processed foods may go up by 5-6% from July 1, when GST kicks in.” Sahil Gilani, director of sales & marketing at Gits Food, said, “Most Gits products will now fall in the 18% GST bracket. Unfortunately this will drive up the prices to some extent.”
However, Ullas Kamath, joint MD of Jyothy Laboratories, which makes Henko detergents, shared a more pragmatic view. Although he predicted a price hike of around 5% for detergents, he said it will not lead to down-trading by consumers to cheaper brands. “Margins may get affected for a month or so, but competition and market forces will finally decide the pricing,” he added.
Similarly, consumer durables and mobile phones could also see a minimal price increase of 2-5%, manufacturers said. Kamal Nandi, business head & EVP, Godrej Appliances, said, “We…