Foods giant Nestle will drop prices of its Maggi ketchup, Cerelac infant foods and select dairy products following the introduction of the goods and services tax (GST).
With the reduction in GST rate on milk powders, prices of everyday dairy whiteners are expected to be reduced by 4-5 per cent.
Nestle managing director Suresh Narayanan said benefits of lower taxes wherever applicable would be passed on to consumers. The maker of Maggi noodles, KitKat chocolate and Nescafe coffee did not specify extent of price drop, saying was in the process of working out details of the new pricing for its brands.
The Gurgaon-based firm said its GST preparedness included engaging with and training over 3,500 suppliers, 1,600 distributors covering direct value chain and awareness programmes.
At a meeting with industry chambers, Arun Jaitley urged companies to ensure all benefits on account of the GST rollout be passed on to consumers transparently. He said he was certain that the new taxation would not have an inflationary impact on the economy and that industry should get together to educate distributors, retailers and consumers.
While foods such as milk and curds draw zero GST, products such as tea, coffee and skimmed milk powder are in the 5 per cent slab.
Butter, cheese, ketchups and sauces are in the 12 per cent slab, while chocolate, chocolate-coated wafers, aerated water and drinks are categorised under the highest tax slab rate of 28 per cent.
Analysts said post GST implementation, most FMCG companies will be able to generate substantial savings in logistics and distribution costs as the need for multiple sales depots will be eliminated.
Till now, consumer goods firms have been paying 24-25 per cent taxes including excise duty, VAT and entry tax. With a tax rate of 18 per cent under GST, there could be a significant reduction of 6-7 per cent in taxes.