A

PROJECT REPORT

ON

IMPACTS OF GOODS & SERVICE TAX ON FMCG SECTOR

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT FOR THE

AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED

BY

MD JUNAID ALI

HALL TICKET NO. : 140221672027

UNDER THE GUIDANCE OF PROF.

Dr. T. RAGHAVENI
(ASSOCIATE PROFESSOR)

DEPARTMENT OF BUSINESS MANAGEMENT

AMJAD ALI KHAN COLLEGE OF BUSINESS

ADMINISTRATION (Affiliated to Osmania University)
Mount Pleasant, 8-2-249 to 267, BANJARA Hills Rd Number 3, Hyderabad,
Telangana - 500034, India
(2021 – 2023)

1
DR. LAKSHMI RAWAT Office: “Mount Pleasant” DIRECTOR #8-2-
249,RoadNo.3,BanjaraHills,
Hyderabad – 500034,
: 040-23280241 / 040-2328024
Fax: 040-23280786,
E-mail:professorshehbaz@yahoo.com
amjadalikhan.college@gmail.com
Website: www.amjadalikhancollege.edu.in

CERTIFICATE

This is to certify that the project report titled IMPACTS OF GOODS & SERVICE TAX ON
FMCG SECTOR, submitted in partial fulfilment for the award of MBA program of
Department Of Business Administration, O.U., Hyderabad, was carried out by MD JUNAID ALI
bearing the HT. NO. 140221672027 student of MBA (FINANCE). This has not been submitted
to any other university or institution for the award of any degree /diploma / certificate.

DR. LAKSHMI RAWAT

DIRECTOR

2
 Prof. Dr. T. RAGHAVENI Office: “Mount Pleasant”
ASSOCIATE PROFESSOR #8-2-249,RoadNo.3,BanjaraHills,
Hyderabad – 500034,
: 040-23280241 / 040-2328024 Fax:
040-23280786, E-
mail:raghaveni.t@amjadalikhancollege.edu.in
Website: www.amjadalikhancollege.edu.in

CERTIFICATE

This is to certify that the project report titled IMPACTS OF GOODS & SERVICE
TAX ON FMCG SECTOR, submitted in partial fulfilment for the award of MBA
program of Department Of Business Management, O.U., Hyderabad, was carried out
by MD JUNAID ALI bearing the HT. NO. 140221672027 student of MBA
(FINANCE) under my guidance. This has not been submitted to any other university or
institution for the award of any degree / diploma / certificate.

Prof. Dr. T. RAGHAVENI

ASSOCIATE PROFESSOR

3
 DECLARATION

I hereby declare that this project report titled a study on “IMPACTS OF GOODS &

SERVICE TAX ON FMCG SECTOR” submitted by me to the department of MASTER OF

BUSINESS ADMINISTRATION (Osmania University), is a record of bonafide work

undertaken by me.

To the best of my knowledge and belief, this project is not submitted to any other

University or Institution for the award of any degree or any diploma/ certificate or

published any time before.

MD JUNAID ALI

HALL TICKET NO: 140221672027

4
 ACKNOWLEDGEMENT

I would like to give special acknowledgement to Dr. LAKSHMI RAWAT DIRECTOR, AMJAD

ALI KHAN COLLEGE OF BUSINESS ADMINISTRATION (Affiliated to

Osmania University) HYDERABAD, for his consistent support and motivation.

I am grateful to prof. Dr. T, RAGHAVENI, ASSOCIATE PROFESSOR, AMJAD

ALI KHAN COLLEGE OF BUSINESS ADMINISTRATION (Affiliated to

Osmania university) HYDERABAD, for her technical expertise, advice, and excellent

guidance. she not only gave my project a scrupulous critical reading but added many

examples and ideas to improve it.

I would like to express my appreciation towards my friends for their encouragement and support

throughout this project.

MD JUNAID ALI

HALL TICKET NO: 140221672027

5
 TABLE OF CONTENTS
S.NO DESCRIPTION PAGE NO.
CHAPTER-1 1.1 INTRODUCTION 7-9

1.2 NEED OF THE STUDY 10-11

1.3 OBJECTIVES 12-13

1.4 HYPOTHESIS 14-19

1.5 LIMITATIONS OF THE STUDY 20-21

CHAPTER-2 RESEARCH & METHODOLOGY 22-25

CHAPTER-3 LITERATURE REVIEW 26-27

CHAPTER-4 DATA ANALYSIS AND 28-34

INTERPRETATION
CHAPTER-5 INDUSTRY PROFILE & ITS IMPACT 35-42

CHAPTER-6 FINDING, SUGGESTION AND 43-44

CONCLUSION

CHAPTER-7 BIBILOGRAPHY / REFERENCE 45

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 CHAPTER-I

1.1 INTRODUCTION:

The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the
supply of goods and services in India. Its implementation in July 2017 brought about
significant changes in the taxation structure, affecting various sectors, including the
Fast-Moving Consumer Goods (FMCG) sector. The FMCG sector encompasses a
wide range of products that are consumed daily, such as food items, beverages,
personal care products, household goods, and more.

The introduction of GST had both positive and negative impacts on the FMCG
sector, influencing businesses, consumers, and the overall economy. Some key
impacts of GST on the FMCG sector include:

Simplified Tax Structure: GST replaced multiple indirect taxes with a unified tax,
streamlining the taxation system. This simplification reduced compliance
complexities for FMCG companies, as they no longer needed to navigate different
tax laws across various states.

Removal of Cascading Effect: GST introduced a mechanism for input tax credit,
allowing businesses to claim credit for taxes paid on inputs or raw materials. This
eliminated the cascading effect of taxes, reducing the overall tax burden for FMCG
companies.

Supply Chain Efficiency: The implementation of GST led to the removal of inter-
state checkpoints and barriers, enabling a smoother movement of goods across the
country. This facilitated a more efficient supply chain for FMCG companies,
reducing transportation time and costs.

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Impact on Pricing: The GST tax structure classified goods into different tax slabs,
ranging from 0% to 28%. While some FMCG products witnessed a reduction in tax
rates, others experienced an increase. This impacted product pricing, with some items
becoming cheaper and others potentially seeing price hikes.

Compliance and Digitalization: GST brought greater transparency and digitization to

the tax system. FMCG companies had to adapt to new compliance requirements,
maintain detailed records, and submit regular returns in digital formats.

Impact on Small and Medium Enterprises (SMEs): The FMCG sector comprises a
significant number of SMEs. The transition to the GST regime initially posed
challenges for these smaller businesses in terms of compliance and understanding the
new tax structure. However, over time, the simplified tax system and input tax credit
benefits helped SMEs streamline their operations.

Consumption and Consumer Behavior: The impact of GST on product pricing and
overall tax changes influenced consumer behavior and consumption patterns. Some
consumers may have shifted their preferences towards products in lower tax slabs,
leading to changes in demand within the FMCG sector.

8
Overall, the introduction of GST had a transformative impact on the FMCG sector,
with changes in pricing, supply chain operations, compliance procedures, and
consumer behavior. As with any major policy change, the long-term effects continue
to evolve, and the FMCG sector continues to adapt to the new tax regime.

9
1.2 NEED OF THE STUDY :

The study of the impact of Goods and Services Tax (GST) on the Fast-Moving
Consumer Goods (FMCG) sector is essential due to several reasons:

Significant Sectoral Importance: The FMCG sector plays a crucial role in the Indian
economy, contributing significantly to GDP, employment generation, and consumer
spending. Understanding how GST has affected this sector provides valuable insights
into broader economic implications.

Policy Evaluation: GST is a major tax reform in India that aimed to simplify the tax
structure and boost economic growth. Evaluating its impact on the FMCG sector helps
policymakers assess the effectiveness of the tax reform and make data-driven decisions
for future policy changes.

Business Strategy and Planning: For FMCG companies, studying the impact of GST
helps them adapt their business strategies and pricing models. Understanding how GST
has affected their supply chains, pricing, and market demand allows companies to
optimize their operations for better performance.

Consumer Behavior: GST-induced changes in product pricing and tax rates can
influence consumer behavior and purchasing decisions. Analyzing this impact helps
marketers and businesses understand consumer preferences and adjust marketing
strategies accordingly.

Supply Chain Efficiency: GST aimed to create a more seamless and efficient supply
chain by eliminating inter-state barriers. Studying its impact on the FMCG sector sheds
light on the improvements in supply chain logistics and potential areas for further
enhancement.

10
Small and Medium Enterprises (SMEs): The FMCG sector comprises numerous
SMEs. Evaluating the impact of GST on these smaller businesses helps identify
challenges they face in compliance, taxation, and overall operations, enabling
policymakers to provide support and targeted interventions.

Tax Revenue and Compliance: GST aimed to widen the tax base and increase tax
compliance. Understanding its impact on tax revenue generation in the FMCG sector
helps in assessing the effectiveness of the tax reform in meeting revenue targets.

Economic Growth and Competitiveness: The FMCG sector's performance is closely

linked to the overall economic growth of the country. Analyzing the impact of GST on
the sector provides insights into its contribution to economic development and global
competitiveness.

Academia and Research: Research on the impact of GST on the FMCG sector
contributes to the body of knowledge and academic literature on tax reforms, economic
policies, and business dynamics.

Overall, the study of the impact of GST on the FMCG sector is vital for policymakers,
businesses, consumers, and researchers alike. It provides a comprehensive
understanding of how GST has influenced various aspects of the sector and helps in
making informed decisions for future policy and business planning.

11
1.3 OBJECTIVES :

The objectives of studying the impact of Goods and Services Tax (GST) on the Fast-
Moving Consumer Goods (FMCG) sector are multifaceted and aimed at gaining a
comprehensive understanding of how the tax reform has affected this crucial sector
of the economy. Some of the primary objectives include:

Assessing Economic Impact: To evaluate the economic consequences of GST

implementation on the FMCG sector, including changes in production, consumption,
investment, and overall economic growth.

Understanding Pricing Changes: To analyze how GST has influenced the pricing of
FMCG products, including the impact on consumer prices and changes in demand
patterns.

Evaluating Supply Chain Efficiency: To assess the impact of GST on the FMCG
sector's supply chain operations, logistics, and inventory management, and identify
improvements in efficiency and cost savings.

Examining Tax Revenue Collection: To study the impact of GST on tax revenue
collection from the FMCG sector and understand its contribution to government
finances.

Assessing Competitiveness: To analyze how GST has affected the competitiveness of

FMCG companies, both domestically and in comparison to international competitors.

Analyzing Impact on Small and Medium Enterprises (SMEs): To understand how

GST has impacted small and medium-sized enterprises in the FMCG sector and
identify measures to support their growth and sustainability.

12
Studying Consumer Behavior: To examine changes in consumer behavior,
preferences, and purchasing patterns in response to GST-induced price fluctuations
and tax rate changes.

Providing Policy Recommendations: To offer evidence-based policy

recommendations to address challenges and further enhance the positive impact of
GST on the FMCG sector.

Contributing to Academic Knowledge: To add to the body of academic literature and

research on the impact of tax reforms and policy changes on specific sectors of the
economy.

By pursuing these objectives, researchers, policymakers, and businesses can gain

valuable insights into the implications of GST on the FMCG sector and make
informed decisions to drive economic growth, enhance competitiveness, and ensure
sustainable development in the country.

13
1.4 HYPOTHESIS :

"The implementation of GST has led to a reduction in overall tax burden for FMCG
companies, resulting in increased profitability and financial performance."

"GST has positively influenced the pricing dynamics of FMCG products, leading to
reduced prices for certain categories and increased demand from consumers."

"The streamlined supply chain under GST has resulted in cost savings and improved
operational efficiency for FMCG companies."

"GST has had a varying impact on different sub-sectors within FMCG, with certain
segments experiencing more significant growth compared to others."

"The compliance burden under GST has presented challenges for small and medium-
sized FMCG enterprises, affecting their growth and competitiveness."

"Consumer behavior in the FMCG sector has undergone changes post-GST

implementation, with consumers showing a preference for products with reduced tax
rates."

"GST has facilitated the formalization of the FMCG sector, leading to increased tax
compliance and widening the tax base."

"GST has had a positive impact on the organized retail segment within the FMCG
sector, fostering growth and investment."

"FMCG companies have actively adapted their business strategies, product

portfolios, and marketing approaches to align with the GST regime."

"GST has promoted a more transparent and digitized tax system in the FMCG sector,
reducing tax evasion and enhancing overall tax administration efficiency."

It's important to note that these are hypothetical statements and require empirical
research and data analysis to confirm or reject them. Researchers would need to
collect relevant data, perform statistical analysis, and draw conclusions based on the
evidence obtained to validate or refute these hypotheses
14
1.4.1 HYPOTHESIS 1

H0= Wholesalers and retailers who file GST on their own do not have
problem while filing GST.

TABLE 1

observed value
sum of has purchasing power affected file GST on their own
has purchasing power affected 1 2 grand total
1 3 6 9
2 64 32 96
Grand total 67 38 105

TABLE 2

expected value
1 2 Grand total
1 5.742857143 3.257142857 9
2 61.25714286 34.74285714 96
Grand total 67 38 105

CHI-SQUARE/ P VALUE-0.047

SIGNIFICANCE VALUE-0.05

CRITICAL VALUE- 3.96

DEGREE OF FREEDOM – 1

INTERPRETATION

chi –square test of independence showed that there is no significant

association between difficulty faced by a retailer or wholesaler in filing gst
and if they file gst on their own or not.

X2(1, n=56) =0.047, P=0.05.

Thus, we reject the null hypothesis, therefore increase in total cost of

construction does increases the price for the end buyer

15
1.4.2 HYPOTHESIS 2 –

H0= Wholesalers and retailers who file GST on their own do not have
problem while filing GST.

TABLE 3

observed value
sum of FMCG expensive because of GST file GST on their own
GRAND
FMCG expensive because of GST 1 2 TOTAL
1 21 12 33
2 18 10 28
3 27 3 30
Grand total 66 25 91

TABLE 4

expected value
1 2 GRAND TOTAL
1 5.742857143 3.257142857 33
2 61.25714286 34.74285714 28
3 21.75824176 8.241758242 30
Grand total 66 25 91

CHI-SQUARE/ P VALUE-0.032
SIGNIFICANCE VALUE-0.05
CRITICAL VALUE- 6.86
DEGREE OF FREEDOM – 2

INTERPRETATION

chi-square test of independence showed that there is no significant

association between price of raw material and the price of goods.

X2(2, n=56) =0.05, P=0.05

Thus, we reject the null hypothesis therefore the increase in the price of the
raw material of FMCG has an effect on the price of goods.

16
1.4.3 HYPOTHESIS 3

H0= If the government provides relief to FMCG there will be no impact on

purchasing power of the consumer

TABLE 5 –

observed value
sum of has purchasing power affected should FMCG receives benefit in GST
GRAND
has purchasing power affected 1 2 TOTAL
1 7 13 20
2 4 50 54
3 6 6
5 10 30 40
Grand total 21 99 120

TABLE 6

expected value
sum of has purchasing power affected
1 2 GRAND TOTAL
1 3.5 16.5 20
2 9.45 44.55 54
3 1.05 4.95 6
5 7 33 40
Grand total 21 99 120

CHI-SQUARE/ P VALUE-0.02
SIGNIFICANCE VALUE-0.05
CRITICAL VALUE- 9.83
DEGREE OF FREEDOM –3

INTREPRETATION

chi-square test of independence showed that there is no significant

association between GST relief on FMCG and the purchasing power of the
consumer.

X2(3, n=56) =0.05, P=0.02

Thus, we reject the null hypothesis, therefore if GST relief on FMCG is

provided then the purchasing power of the consumer will be affected.

17
 1.4.4 HYPOTHESIS 4-

H0= Purchasing power of the consumer has no effect on the credit period.

TABLE 7 –

observed value
sum of has purchasing power
affected has the credit period affected
has purchasing power affected 1 2 GRAND TOTAL
1 2 18 20
2 14 40 54
3 12 12
5 30 30
Grand total 16 100 116

TABLE 8 –

expected value
sum of has purchasing power affected
1 2 GRAND TOTAL
1 2.75862069 17.2413793 20
2 7.448275862 46.5517241 54
3 1.655172414 10.3448276 12
5 4.137931034 25.862069 30
Grand total 16 100 116

CHI-SQUARE/ P VALUE-0.0491
SIGNIFICANCE VALUE-0.05
CRITICAL VALUE- 7.85
DEGREE OF FREEDOM –3

INTREPRETATION

chi-square test of independence showed that there is no significant

association between purchasing power of a consumer and the credit period

X2(3, n=56) =0.05, P=0.0491

Thus, we reject the null hypothesis, therefore credit period is affected by the
purchasing power of the consumer.

18
1.4.5 HYPOTHESIS 5-

H0= Retailers and wholesalers have seen a decrease in sales and price
because of GST

TABLE 9 –

observed value
sum of FMCG expensive because of GST have the sales affected
FMCG expensive because of GST 1 2 Grand total
1 28 5 33
2 24 4 28
3 18 12 30
Grand total 70 21 91

TABLE 10 –

expected value
1 2 GRAND TOTAL
1 25.38461538 7.615384615 33
2 21.53846154 6.461538462 28
3 23.07692308 6.923076923 30
Grand total 70 21 91

CHI-SQUARE/ P VALUE-0.027
SIGNIFICANCE VALUE-0.05
CRITICAL VALUE- 7.23
DEGREE OF FREEDOM –2

INTREPRETATION

chi-square test of independence showed that there is no significant

association between effect on sales and price of FMCG due to

GST X2(2, n=56) =0.05, P=0.027

Thus, we reject the null hypothesis therefore GST has affected the sales and
prices of FMCG

19
1.5 LIMITATIONS OF THE STUDY :

The study of the impact of Goods and Services Tax (GST) on the Fast-Moving
Consumer Goods (FMCG) sector may encounter several limitations. Some of the key
limitations include:

Time Constraints: Conducting a comprehensive study requires a significant amount

of time and data collection, which may be constrained due to limited research
resources or deadlines.

Data Availability: Access to accurate and relevant data on the FMCG sector, both
pre-GST and post-GST implementation, can be challenging, particularly for certain
niche segments or smaller companies.

Dynamic Business Environment: The FMCG sector is subject to constant changes in

market dynamics, consumer behavior, and business strategies. Studying the impact of
GST may require accounting for other concurrent factors influencing the sector.

External Factors: The impact of GST on the FMCG sector can be influenced by
external factors such as economic policies, international trade dynamics, and changes
in government regulations, making it difficult to isolate GST's specific effects.

Bias in Data Reporting: Some data sources may be influenced by reporting biases,
either intentional or unintentional, which could affect the accuracy and reliability of
the findings.

Sample Selection: The selection of FMCG companies for the study may not be fully
representative of the entire sector, leading to potential biases in the results.

Long-term Impact: Studying the impact of GST in the short term may not capture its
long-term effects, which could take time to fully materialize and stabilize.

20
Limitations of Methodology: The research methodology chosen for the study may
have inherent limitations, such as sample size, survey design, or data analysis
techniques.

Interpretation of Causal Relationships: Establishing a direct causal relationship

between GST and specific outcomes in the FMCG sector may be complex due to the
presence of confounding variables.

Compliance and Reporting Issues: Some companies may face challenges in

accurately reporting their financial and tax data, which could affect the quality of the
data used in the study.

Lack of Post-GST Baseline Data: In some cases, a lack of reliable pre-GST baseline
data may hinder accurate comparisons and make it challenging to attribute changes
solely to GST.

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 CHAPTER- II
RESEARCH AND METHODOLOGY :

Studying the impact of Goods and Services Tax (GST) on the Fast-Moving
Consumer Goods (FMCG) sector requires a structured research methodology. Here is
an outline of the research approach and methodology:

Research Objective: Clearly define the research objectives, which could include
assessing the economic impact, understanding pricing changes, evaluating supply
chain efficiency, analyzing tax revenue collection, and studying consumer behavior.

Literature Review: Conduct an in-depth literature review to understand existing

research, studies, and expert opinions on the impact of GST on the FMCG sector.
This review will provide a foundation for the research and help identify gaps in
knowledge.

Data Collection: Gather relevant data from various sources, such as official
government reports, company financial statements, industry publications, and market
research reports. Data should cover the pre-GST and post-GST periods to facilitate a
comparative analysis.

Quantitative Analysis: Use statistical methods to analyze numerical data, such as

financial figures, sales data, and tax collections, to identify trends and patterns in the
FMCG sector's performance.

Qualitative Analysis: Conduct interviews, surveys, or focus group discussions with

key stakeholders, including FMCG companies, consumers, and tax authorities, to
gather qualitative insights on the impact of GST.

Sector-Specific Analysis: Focus on specific segments within the FMCG sector, such
as food products, personal care, or household goods, to understand how GST has
affected each sub-sector differently.

22
Comparative Study: Compare the performance of the FMCG sector with other
relevant sectors that were also impacted by GST, to gain a broader understanding of
the tax reform's overall effects.

Case Studies: Analyze specific case studies of FMCG companies to delve deeper into
their experiences and responses to GST implementation.

Policy Analysis: Evaluate the effectiveness of GST policies and compliance

measures in the FMCG sector, considering factors like input tax credit utilization and
GST rate rationalization.

Ethical Considerations: Ensure ethical practices throughout the research process,

including data privacy, informed consent, and protection of sensitive information.

Conclusion and Recommendations: Draw conclusions based on the research findings

and provide evidence-based recommendations for policymakers, FMCG companies,
and other stakeholders.

Limitations: Acknowledge any limitations of the research, such as data availability,

time constraints, or possible biases, to ensure the validity and reliability of the study.

The methodology should be well-documented, transparent, and replicable to ensure

the credibility of the research. By employing a robust research approach, scholars
and policymakers can gain valuable insights into the impact of GST on the FMCG
sector and make informed decisions for policy formulation and business strategies

Process of research methodology -

• Research design

• Population

• Instruments

• Questionnaire design

• Data collection

23
➢ Research design

The design in this research is a descriptive design to examine the impact of GST on
Indian economy as a whole and specifically on FMCG sector. Descriptive research
aims to accurately and systematically describe a population, situation or
phenomenon. A descriptive research design can be using a wide variety of
quantitative and qualitative methods

to investigate one or more variables. The data was collected from various retailers
and wholesalers of different regions in Delhi by making a structured questionnaire.
The data was filled by the respondents through offline google form. The data also
includes various tables to aid the reader in understanding the data distribution and
hence provide a better and simplified extraction on impact of GST on Indian
economy and FMCG sector.

➢ Scope of the project-

The project covers possible impact of GST on FMCG sector. It also explains the
perspective positives and negatives of GST implementation to FMCG sector. The
project highlights various problems faced by retailers and wholesalers while filing
GST. They are also asked about the effect of GST on the prices of raw materials and
products. A questionnaire of 18 questions was used to gauge the awareness of GST
amongst retailers and wholesalers of FMCG. The interview was for 15-20 minutes.
Conclusion has been drawn after analysis of combines process.

➢ Type of research the project is descriptive in nature as it describes the various

attributes of GST and its impact on Indian economy in general and on FMCG
specifically.

➢ Method of data collection Primary data collected through sample survey from
retailers and wholesalers of FMCG shops.

24
➢ Questionnaire design

In this research, the questionnaire was designed in closed- ended questions format.
All the questions were multiple choice questions. They are easy to understand and
the respondents didn’t need much time on reading the questions again and again. The
questions were straight forward and quick to respond. Closed- ended questions come
in a variety of forms and they are usually categorized based on the need to have
specific options for the respondents, so that they can select them without any
hesitation. When the data was obtained and compared, these closed ended questions
provided better insight. Closed – ended questions collect data that can be used to
draw generalized conclusions based on statistical analysis.

➢ Statistical tools-

• MS Excel: pictorial and graphical representation of data

• MS Word: preparation of project and other reports

➢ Data Analysis Method

Method of data analysis are primarily determined by the hypothesis to be tested or

research

questions to be answered. According to our project data is analyzed through

hypothesis testing.

We have used Chi-Square test to determine whether there is a significant

relationship

25
 CHAPTER- III
LITERATURE REVIEW:

Empowered committee of finance ministers (2009), introduced their first discussion

paper on GST in India which analyses the structure and loopholes if any in GST.
Vasanthagopal (2011) in the article GST in India, A big leap in the indirect taxation
system discussed the impact of GST on various sectors of the economy. The article
further stated that GST is a big leap and a new impetus to India's economic change.
The constitution 115 amendment bill, 2011. Bird (2012) summarizes in the article the
GST/HST- creating an integrated sales tax in a federal country the impact of GST
will be on Canada. Garg (2014) in the article named basic concepts and features of
goods and services tax in India analyses the impact and GST on Indian tax scenario
and concluded that it will strengthen out free market economy.

Under the study, Kaur. M, et.al (2016), mainly focuses on what are the impacts of
GST after its implementation, the difference between the present indirect taxes and
GST and also benefits and challenges of GST after its implementation. Research
being a qualitative research analysis on how various goods and services are being
taxed under GST. Researches use the consumer price index which is a statistical
estimate constructed using the prices of items collected periodically. With the help of
CPI researcher analysis, the significant impact of GST on various items which comes
unto 20-25%. Researchers conclude stating that GST would reduce the tax burden
and also play inactive role in the growth and development of our country.

Aurobinda Panda (KNT school of Law), Atul Patel (KIIT school of law), “THE
IMPACT OF GST (goods and service tax) ON THE INDIAN TAX SCENE (2010)
AT SSRN”The research paper analyses how GST would impact on Indian tax
scenario. The authors have given a brief history of Indian taxation and its structure.
Background of GST outside India as well as in India is also discussed. Authors
concluded that GST would be beneficial for the industry and the consumers. It would
lead to an increase in revenue for the government.

26
In the study Monika Sehrawat, et.al (December 2015) focuses on GST IN INDIA, A
KEY TAX REFORM for international journal of research- This research presents an
overview of GST concept. It explains the features and its live line of implementation
in India. The paper also highlights the advantages and disadvantages of GST in India.
The author concludes that GST fulfils the requirement of the simplified, user-friendly
and transparent tax system. The author also states that with the coming of GST, it
will lead to higher more employment opportunities and flourish GDP by 1-15 %.

Dr Mohan Kumar, et.al (December 2019) talks about GST AND ITS PROBABLE
IMPACT ON THE FMCG INDUSTRY IN INDIA , for the international journal of
research in finance and marketing. This paper analyzes the impact of the FMCG
industry. The fast-moving consumer goods (FMCG) sector of India compromises
more than 50% of the food and beverage industry.

And another 30% from personal and household care. Presently the peak tax cost for
industry players amount to approximately 27% i.e. (excise duty of 12.5% and VAT
ranging from 12-15%) under the GST regime, its proposed that the revenue neutral
rate would be in the range of 16-19%.

R Hiremani Naik et.al (December 2021) discuss ON PERSPECTIVE IMPACT OF

GST ON FMCG SECTOR IN INDIA” , for international journal of research in
Business studies.

The fast-moving consumer goods (FMCG) segments are the fourth largest sector in
the Indian economy. The sector is likely to see a significant impact once the goods
and service tax(GST) bill is passed as the companies set warehouses across the states
in a bid to have a more tax efficient system. FMCG is one such sector directly having
its impact on the large public. It is very important to study the possible positive and
negative impact of GST implementation on the FMCG sector.

27
 CHAPTER- IV
DATA ANALYSIS & INTERPRETATION :
1. Your gender?

INTERPRETATION

For the above Pie- chart 46 people out of 57 (80% approx.) were males which means
that most of the wholesalers and retailers in the FMCG sector are Males whereas 11
are Females.

2. Are you a wholesaler or retailer of FMCG?

28
INTERPRETATION

For the above Pie- chart the number of wholesalers (30) and retailers (27) is almost
equal.

3. Your age group?

INTERPRETATION

In the above pie- chart the age group of most retailers and wholesalers is between 26
years –50 years where as 18 people above 50 years and 19 people between 10 years
and 25 years

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 4. How many employees do you have?

INTERPRETATION

In the above pie-chart the greatest number of employees (33) that a wholesaler and
retailer has is between 5 and 15 employees whereas least number of employees (11)
are more than 15 employees and 13 have less than 5 employees

5. What percentage of your goods get expired?

INTERPRETATION

For 45 sellers 0%-5% of the goods get expired on the other hand for 8 sellers 6%-
16% of the goods get expired and the only 4 sellers the percentage of goods expired
is more than 17%
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 6. Do you have a GST number?

INTERPRETATION

In the above pie-chart 54 people have a GST number whereas 3 people do not have a
GST number this shows the awareness of people.

7. Is GST a good step by the government?

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INTERPRETAION

Most of the people believe that GST is a good step by the government (40). Whereas
17 people believe that it is not a good step that the government took.

8. Has GST affected your business?

INTERPRETATION

According to the above pie-chart 46 people believe that their business has
been affected due to GST and 11 believe that it hasn’t.

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 9. Have you received GST refund?

INTERPRETATION

As in the above pie-chart 49 people have never received a GST refund and 8 people
have received a GST refund.

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 10. Is GST a way for the government to earn more taxes?

INTERPRETATION

According to the above pie-chart most of the people (30) are neutral and don’t have
an opinion on it whereas 12 people agree that it is a way to make more taxes 10
people strongly agree 2 people disagree and 3 people strongly disagree

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 CHAPTER- V
INDUSTRY PROFILE AND ITS IMPACTS

NESTLE

Founded in 1866, Nestle is the world’s largest food and beverage company. They
have more than 2,000 brands in 186 countries worldwide. The company has been in
the market for more than 150 yrs.

Further, they have set various sustainability goals to achieve by 2030. The ROCE of
the company is 60.83%, and its PE ratio is 73.87. It is also the highest on the list of
top FMCG stocks.

The implementation of Goods and Services Tax (GST) in India had both positive and
negative impacts on Nestlé India, a leading FMCG company. Here are some of the
ways GST impacted Nestlé:

Streamlined Supply Chain: With the removal of inter-state barriers and checkpoints,
GST facilitated a more efficient supply chain for Nestlé. The seamless movement of
goods across states reduced transportation time and costs, leading to improved
operational efficiency.

Input Tax Credit: Under GST, companies could claim input tax credit for taxes paid
on inputs or raw materials used in the manufacturing process. This allowed Nestlé to
reduce its tax liability by offsetting the tax paid on inputs against the tax collected on
its final products, resulting in cost savings.

Impact on Pricing: GST brought changes in tax rates for different product categories.
While some of Nestlé's products experienced a reduction in tax rates, others faced an
increase. This influenced the pricing of certain products and required Nestlé to adjust
its pricing strategy to align with the new tax rates.
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Compliance and Reporting: GST introduced a more transparent and digitalized tax
system, requiring companies like Nestlé to maintain detailed records and submit
regular returns. This necessitated adapting to new compliance requirements,
including revised invoicing procedures and GST rate adjustments.

Impact on Distribution Channels: GST impacted Nestlé's distribution networks, as

the company had to realign its warehousing and distribution strategy to optimize tax
efficiency and minimize logistical costs.

Impact on SME Suppliers: Nestlé relies on a network of small and medium-sized

suppliers for various raw materials. The implementation of GST impacted these
suppliers, especially those below the GST threshold, who had to comply with the
new tax regime.

Cost Structure and Profitability: The changes in tax rates and input tax credit
availability influenced Nestlé's cost structure. The company needed to analyze the
impact on profitability and take measures to maintain competitiveness.

Product Portfolio Rationalization: To adapt to the changes brought about by GST,

Nestlé may have rationalized its product portfolio and made strategic decisions
regarding product offerings and pricing.

Tax Reporting and Reconciliation: The shift to the new GST reporting system
required Nestlé to adapt its tax reporting and reconciliation processes to comply with
the GST law.

Overall, the impact of GST on Nestlé India involved adjustments in pricing, supply
chain operations, distribution strategies, compliance procedures, and business
strategies to align with the new tax regime. While Nestlé faced challenges in
navigating the transition, the implementation of GST also presented opportunities for
cost optimization and supply chain efficiency improvements.

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DABUR INDIA PVT

Dabur India Ltd, a leading FMCG company primarily dealing with

products in the categories of healthcare, personal care, and food.

Founded in 1884, Dabur India Ltd is one of India’s leading FMCG companies with a
revenue of Rs. 11,281 cr. in FT 2022. It is also the world’s largest ayurvedic and
natural healthcare company with a legacy of quality and experience of over 133 yrs.
The ROCE of the company is 25.75%, and its PE ratio is 53.33.

Impact on Pricing: The introduction of GST brought changes in tax rates for different
product categories. For Dabur India Ltd, this could have influenced the pricing of its
products, as some items might have experienced a reduction in tax rates, while others
might have faced increased rates. The company had to revise its pricing strategy to
align with the new tax structure.

Supply Chain Efficiency: With the removal of inter-state barriers and the
implementation of a more efficient tax system, GST could have positively impacted
Dabur's supply chain operations. The seamless movement of goods across states
might have reduced transportation time and costs, leading to improved operational
efficiency.

Input Tax Credit: Under GST, companies could claim input tax credit for taxes paid
on inputs or raw materials used in the manufacturing process. This allowed Dabur
India Ltd to offset the tax paid on inputs against the tax collected on its final
products, resulting in potential cost savings and improved cash flow.

Compliance and Reporting: GST introduced a more transparent and digitalized tax
system, requiring companies like Dabur to maintain detailed records and submit
regular returns. This necessitated adapting to new compliance requirements,
including revised invoicing procedures and GST rate adjustments.

Impact on Product Portfolio: Dabur India Ltd operates in multiple product categories,
and the impact of GST on each product segment could have varied based on the tax

37
rate changes. The company might have had to reevaluate its product portfolio and
pricing strategies accordingly.

Tax Reporting and Reconciliation: The shift to the new GST reporting system
required Dabur to adapt its tax reporting and reconciliation processes to comply with
the GST law.

Impact on Distribution Channels: GST might have influenced Dabur's distribution

networks, as the company had to realign its warehousing and distribution strategy to
optimize tax efficiency and minimize logistical costs.

GST rate on FMCG goods

GST rates for all different goods or products under the FMCG the has been
announced by the Indian Government. Most of the products/goods have been
categorized under the tax brackets as expected by the FMCG industry experts.

Although there are few products placed under the 12% bracket which is expected to
be more expensive than under current laws. Below figure explaining the different
products falling under the different tax brackets.

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Basic food products such as milk, rice, wheat and fresh vegetables have been kept
under the NIL bracket which is in line with the expectation from the FMCG experts.
Paneer branded and sold like mother dairy paneer or Nestle Paneer and Frozen
vegetables have been kept under the 5% bracket which would be largely neutral as
the current rates are around 3-4%.

Although there are certain products like butter, Cheese and Ghee will get expensive
under GST as they are placed in the 12% bracket which is higher than the current
average tax rate of 4-5%. Gifting dry fruits at the time of Diwali is going to be more
expensive as dry fruits have been placed under the 12% bracket under GST law.

FMCG sector is very pleased with the rates announced under GST law for FMCG
products. The FMCG industry is going to benefit from the lower logistics cost and
better competitive market and rates for most of the products being kept under the
expected tax bracket.

No doubt, GST has bought several non-tax payers into the Tax bracket. But, what
about some genuine and necessary sectors which have been affected because of the
GST? It has vitalized some FMCG companies, but what about the rest? More or
less of the FMCG sectors have been touched by this new regime. FMCG sector is
the fourth biggest economy in India, which is sectioned into three categories as
Food and Beverages, Household and Personal Care and Health Care, and their rates
getting accounted are 19%, 50% and 31% respectively

Some companies such as HUL, P&G, Jyothy Laboratories, Nestle, Dabur, Himalaya
etc. come under the list of GST impacted companies

Companies Impacted HUL, P&G, JYOTHY LAB AMUL, NESTLE, MOTHER

DAIRY HUL, P&G, DABUR, HIMALAYA, PATANJALI HUL, DABUR,
HIMALAYA, P&G

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 Product detergent butter/ ghee cheese skincare / shampoo
Previous Rates 23% 4-5% 24-25% 24-25%
Post GST Rate 28% 12% 28% 28%

However, tax rates on Toothpastes, hair oil, soaps are reduced from 22-24% to 18%.
This has favorable impact on Colgate-Palmolive, HUL, P&G, etc.

Not only this, it impacted the other FMCG products too. As, it affected the top notch
companies, the companies started revising their rates and prices according to the GST
implementation, and thus benefitted the factory as they started with cost cuttings, the
distributors started saving on their transportation costs, and of course the consumers
availed the products at a low rate because the companies started to revise their prices.

Lets see, what GST has done till now-

The government tried to place GST rates with Indirect tax (VAT, sales, octroi etc.),
to control inflation in the country and to avoid the negative impact on consumer. The
consumer edibles such as cereals, milk and other mass consumption products were
marked at 5%, stationaries, medicines, and fruit juices were fixed at 12%. Other
FMCG such as cosmetics were pegged at 18%, and the luxury cosmetics were
included in 28% GST rate.

It adversely started affecting the consumers of these products, but as there was a
great deal of interference from the distributors and the consumers, the government
addressed this concern and reduced the rates from 28% to 18% which came in effect
from November, 2017.With this tax regulation, the companies had to file their
GSTIN invoice, the bigger organizations could account these details with the help of
tax consultants, but small companies struggled to fulfill these tax regulations.

Companies such as Marico, and Colgate has benefitted from the GST structure, the
edible oil rates, the tooth paste rates can be availed at a low price. But you cannot gift
dry fruits, as it has become an expensive FMCG product. Other dairy products such
as Ghee, cheese, butter has to be used wisely, keeping their rates, but don’t worry,
they will revise their price as well. “We believe it could result in a faster
consumption shift from unbranded to branded products, spurring volume growth for
FMCG companies. Simultaneously, it will also bring operational efficiency with

40
rationalization of supply chain by removing bottlenecks,” says Sanjay Manyal,
Analyst, ICICI Securities. He also pointed out that tax exemption provided to several
critical products required for food processing — jaggery, cereals, and milk — would
benefit this industry.

Impact of GST on FMCG business costing-

1. Logistics costs

The GST has put up a positive effect on reducing the logistics cost, which has
benefitted the FMCG companies a lot. GST is helping the FMCG companies to save
some amount of logistic and transport charges. Previously, the distribution costs was
around 2 to 7% of the total cost, but now it has now dropped to 1.5%. Now, at least,
the companies save their costs and do more towards the society’s welfare. So, the
GST has impacted in a very positive way for companies, as they have made the
supply chain management to run smoothly and effectively, in regards to timely
payment of tax, correct claims of input credit, and CST removal too. This tax
deduction in logistics and transports have benefitted the consumers to avail the
company products in much cheaper rates.

2.Warehouse

Warehouses are used to distribute the goods locally. The finished goods from the
factory arrives at warehouses and they get distributed to retailers and customers in
the specific areas. Previously, the warehouses were set up on at those states where
the effective tax were low, and this also affected the transport costs for the
distributors and the manufacturers. But now, the distributors and the manufacturers
don’t have to worry about their costs, as GST is helping them to cut their costs. With
the execution of GST in the country, the FMCG companies can set up their
warehouses anywhere, in any state.

3.Foreign Investment

The foreign investments has now increased in India. Our country is now a unified
market. Thanks to GST. The FMCG goods that are manufactured in India has now
become more competitive in the international markets, because of its low
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 production cost. As the GST has reduced its export cost and production cost both.
The implementation of GST has lowered almost all taxes and made it easier for
manufacturers and business owners to sell in the global and international market
without any hassle.

4.Business Cost

The GST implementation has reduced all taxes and some taxes have been totally
removed from the Indian Market and the CST has been removed under the GST
regime. The CGST and SGST has replaced many other taxes such as Service Tax,
Central Excise Duty, Custom and Octroi Duty etc. You might have noticed these
replacements and cost reductions on your restaurant bills, shopping bills. It feels
really good, when you see your money is getting saved on your bills. The business
cost have also been reduced and totally cut. GST have changed VAT. Now if you are
a business owner, you don’t have to pay the different amount of taxes in every state.
The GST is one tax system for all over India, so you have got rid of other small taxes
and amounts

Real thanks to GST, it has not only benefitted our customers but also the small
business owners and entrepreneurs. Not just this, there are more benefits of GST. If
we consider this impact, then we can surely reduce the Black money in the country. It
had few initial troubles, but now it has become a positive factor in the country. One
Nation, One Tax!

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 CHAPTER- VI
SUGGESTION AND CONCLUSION:
• Government must take the necessary steps to raise awareness of the pros
and cons of GST among consumers and retailers.

• The necessary steps must be taken by the authorities to ensure that all
vendors register with the GST properly.

• Government should monitor the use of GST prices, in order to provide for
price reductions.

• People expect to be relieved of GST estimates of necessities or declining

prices soon

GST will bring in transparent and corruption-free tax administration, removing the
current shortcomings in indirect tax structure. GST is business-friendly as well as
consumer-friendly. GST in India is poised to drastically improve the positions of
each of these stakeholders. We need a change in the taxation system which is better
than earlier taxation. This need for change leads us to ‘need for GST’. GST will
allow India to better negotiate its terms in the international trade forums aimed at
increasing the taxpayer base by bringing SMEs and the unorganized sector under
its compliance. This will make the Indian market more stable than before and
Indian companies can compete with foreign companies. GST is a recent policy
introduced. GST aims at simpler tax regime and transparency in all transaction.
FMCG sector which is an important player in the market sector has been impacted
by GST to some extent. This research concludes that GST has an impact on various
aspects of FMCG companies.

Since it has only been Five years from when the GST law came into force, the
extent or degree of such impact cannot be completely fathomed. It would require
more time evaluate whether GST would prove to be beneficial to FMCG retailers
and wholesalers. After questioning 56 retailers and wholesalers about GST we can
conclude that their businesses have been affected due to GST. According to our
analysis we have concluded that retailers and wholesalers who file GST on their

43
own face problems while filing GST. It is a new way of filing tax so traditional
business have issues while filing GST.

The increase in prices of raw material of FMCG has effect on the price of goods
therefore the price of raw material has a direct relation on the sales and the hiked
price ultimately is paid by the consumers We also found out that if the government
provides relief on FMCG the purchasing power of the Consumer will be affected as
the prices will fall down the purchasing power will go up. The purchasing power
also has relationship with the credit period. GST is followed by many top
economies in the world and hopefully it will bear fruit to the Indian economy as
well.

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 CHAPTER-VII

REFERENCE :

References Dash. A (2017) “Positive and Negative impact of

GST on Indian Economy”, International Journal of Management
and Applied Science, ISSN: 2394-7926 Volume-3, Issue-5,
pp160- 162. Dang priya jha, et al., (2004) An empirical view of
the different types of consumer promotions in india, working
paper, indian institute of management [3] Jayashree R., R
Kotnal.,(2017) influence of „GST‟ on the fast moving consumer
goods , International Journal of advanced Research and
Development, Volume 2; Issue 6 pp12-15 Chavan, R. (2017). A
study on impact of goods and service tax on Indian industries
with reference to FMCG sector.

http://www.gstcouncil.gov.in/%20https://cleartax.in/s/gst-consumer-fmcg

https://sinewave.co.in/blog/how-gst-has-impacted-the-fmcg.aspx

https://www.ibef.org/industry/fmcg.aspx

https://kb.icai.org/pdfs/PDFFile5b432d754ab853.80651823.pdf

https://cleartax.in/s/gst-rates

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