INDIRECT TAX

GROUP ASSIGNMENT
THE IMPACT OF COVID 19 ON FMCG SECTOR
GROUP MEMBERS
Name Roll No.
FENIL GABANI IC201128
HARSH SISODIA IC201130
DHAVAL CHATWANI IC201122
DEV PYASI IC201218
SAMYAK MODI IC201273
VIVEK SABOO IC201287
SAMRIDDHI GUPTA IC201173
ACKNOWLEDGEMENT
On the very outset of this project, our group would like to express their heartiest
gratitude to our teacher Prof. Nitin Kishore Saxena and the Director of our Institute Dr.
Udailal Paliwal for guiding and providing us with the opportunity to learn about new
thing by various means.

We would like to extend our gratitude towards the management of the ICNU for
providing us with various resources and research materials for our reference.

We would also like to thank our fellow group members and our classmates for providing
their unending support and help, whenever it was needed.

We are ineffably indebted to all the personages for conscientious guidance and
encouragement to complete this project.

 Thank you!

Table of Contents
ABSTRACT...............................................................................................................................................
INTRODUCTION.....................................................................................................................................
 1. Costs of logistics and warehousing........................................................................................
2.GST rates on FMCG goods.........................................................................................................
QUESTIONS…………………………………………………………………………………………………………………………………
………..

CONCLUSION........................................................................................................................................

ABSTRACT
The global impact of the coronavirus pandemic is unprecedented, and it is much more
pronounced in developing nations like India. One of the biggest industries in India is fast
moving consumer goods (FMCG), which includes a wide range of businesses including
home, personal care, etc., with strong demand, frequent consumption, and low-cost
services. This essay makes an attempt to analyse the COVID-19 outbreak in the FMCG
industry. It demonstrates how FMCG is unusually impacted by a variety of reasons,
including labour migration to their home countries, logistical challenges, and changes in
consumer preferences, such as a sharp rise in sanitary product demand and a boom in
cosmetics demand.

INTRODUCTION

The market is not only tremendously big, but it is also very competitive because
fast-moving consumer items have such a rapid turnover rate. Tyson Foods, Coca-
Cola, Unilever, Procter & Gamble, Nestlé, PepsiCo, and Danone are a few of the
biggest firms in the world that battle for market share in this sector. These
businesses must concentrate their efforts on marketing quickly disseminated
consumer goods in order to lure and draw customers to purchase their goods.
As a result, packaging plays a crucial role in the manufacturing process. In order
to enhance efficiency, the logistics and distribution systems frequently need
secondary and tertiary packing. In addition to giving consumers information and
sales incentives, the unit pack or primary packaging is essential for the
preservation of the product and its shelf life.

1ST QUESTION
FIND OUT THE INDIRECT TAX RATE PRE AND POST GST FOR THE SELECTED
SECTOR

Indirect tax rate pre-GST on FMCG sector:

So before the implementation of the GST in India most of the FMCG products were being taxed
at the rates ranging from 22 to 24 %.

The following are the some examples: the tax rate on detergents was 23% while sanitary
napkins were being taxed at the rate of 10 to 11%. The skincare products also including
shampoo were taxed at 24 to 25 percent standard rate. Some of the daily use FMCG products
ghee, butter and cheese were being taxed at comparatively lower rates at the 3 to 5%.

Thus we can see that the average tax rate on the FMCG products before GST was not more
than likely 24 to 25 percent.

Indirect tax rate post-GST on FMCG sector:

The GST (goods and services tax) was introduced with the five standards tax rates : 0% , 5%,
12%, 18% and 28%.

Under this new tax regime the average tax rate in FMCG sector ranges from 18 to 20% which
we can see that it’s clearly lower than the previous tax system. However, if you see the GST
impact on the individual products the tax rates of the some commodities have increased while
some products decreased too.

The following are the examples : the tax on detergents is 28 % which we can see is higher than
previous pre rates. The tax rates on toothpaste, soap and hair oil and soaps is reduced from
previous 22-24 % to 18% under GST. Some of the basic use commodities like eggs, milk,
paneer, curd, wheat ,etc are been kept as free of tax.

2ND RECENT AMENMENTS IN GST AND ITS IMPACT ON THE SELECTED

SECTOR

The different tax heads that applied to the FMCG sector are now bracketed under a single point
of taxation in the form of GST. It has brought down the earlier 22–24% tax rate to 18–
20%. GST on the FMCG products, though, cannot be reduced to the mere change in the rate of
taxation. It has also impacted this sector on several other fronts, such as its logistical costs,
business operations, warehousing, and pricing of individual goods.

1. Costs of logistics and warehousing

Overall, GST has reduced the logistical costs for the FMCG sector. Distribution costs that came
out to be 2–7% of the total cost earlier dropped to 1.5% after GST implementation. Since
companies previously paid taxes to the states based on their geographical location, GST has had
a significant impact on the effective cost management of their supply chains.

The different tax heads that applied to the FMCG sector are now bracketed under a single point
of taxation in the form of GST. It has brought down the earlier 22–24% tax rate to 18–
20%. GST on the FMCG products, though, cannot be reduced to the mere change in the rate of
taxation. It has also impacted this sector on several other fronts, such as its logistical costs,
business operations,
warehousing, and pricing of
individual goods

2.GST rates on
FMCG goods
GST on the FMCG
products will be felt
in the price of goods.
Basic food items like
milk, rice, and fresh vegetables have been kept under the NIL bracket,
while

branded food items have been kept under the 5% taxation bracket. It
includes items like branded paneer—Mother Dairy Paneer, frozen
vegetables, etc. The rate is not much higher than the current rates of 3–4%.
Products like butter, cheese, and ghee are expected to become expensive
as they have been categorised under the 12% bracket, a considerable
increase from

the current rate of 4–5%.FMCG firms are eligible for several tax exemptions
based on the final form of the product. For example, some items are
eligible for an exemption if they do not have a registered brand name or
are not packaged in a unit container. It is mandated that firms maintain a
record of tax-exemptible and taxable products while computing input tax
credit reversals.

Fluctuation in the price of goods after the implementation of GST is

expected to be passed on to the final consumer through a proportionate
change in prices. A rise in taxation is to be reflected as a rise in prices.
Similarly, a reduction in taxes will reflect a reduction in prices.

Another factor that confuses the taxing system and results in higher tax rates (5%, 12%,
18%, and 28%) the FMCG industry has been plagued by unjustified categorization
conflicts. The effective rate has been the FMCG and retail industries' major concern
since the adoption of the GST. While GST was supposed to promote consistency and
simplify taxation, the various tax rate Costs for various mass-consumption products
increased as a result of rates for consumer durables. Assuming the same, Rate
rationalisation has been a goal of the GST Council. Recently, the GST Council6
discussed the wide rate. Reductions were made specifically for items like sanitary
napkins and home electronics. Equipment /white goods (food grinders, mixers, shavers,
hair dryers etc.). Businesses must constantly Examine the effects of the rate
rationalisation, particularly from a standpoint that is anti-profiteering. Since medications
or ayurveda products are normally taxed at a lower rate than cosmetics, the
categorization of some cosmetics, such as skin care treatments that also have medicinal
effects and include recognised medical components, has historically been the subject of
dispute. If a preparation is intended primarily for the treatment of skin problems or
illnesses and whether or not its contents have known or recognised therapeutic value
will determine if it may be categorised as a medicament.
 3RD ANALYSIS OF THE DATA AND FIND OUT THE IMPACT OF GST
1. NESTLE

In the above chart we can see that COMC/RFO is inclining from 2012 declining in 2017 and it
increased to 50 and above. Compared to percentage change in purchase and profit it shows
more variation.

In the below chart of percentage change in profit the 2013 has fluctuations compared to 2017
and 2018 and it is declining in March 2022 compared to 2016. Compared to sales and purchase
it has more fluctuations.
In below the chart shows that the percentage change in purchase is around 0 in 2012 and 100
in 2014 and 80 in 2018 that is decreased from 2013 to 2018. And in 20121 and 2022 it
decreases at declining rate.

2. Adani ANALYSIS
 percentage changes in Profit
1500

1000

500

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41
-500

-1000

-1500

-2000

-2500

-3000

-3500

For this company the profit is high pre gst where we see lose also after gst .
which show a high effect of profit one reason is change in gst .

Net Sales/Income from operations

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45

We see a drastic change in sales of the company . after gst the

company has high sales where before gst the sale was
comparative low . so we see a good effect where one reason
could be gst .
 Purchase of Traded Goods
25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45

We see a drastic change in purchase of the company . after gst the company has high
purchase where before gst the purchase was comparative low . so we see a good effect
where one reason could be gst .
3. GODREJ

percentage changes in Profit

200

180

160

140

120

100

80

60

40

20

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

For this company the profit in pre gst and post gst is same . showing almost
similar result . so we can conclude the there is no such different pre and
post gst.
 Net Sales/Income from operations
2,000.00
1,800.00
1,600.00
1,400.00
1,200.00
1,000.00
800.00
600.00
400.00
200.00
0.00
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

We see a drastic change in sales of the company . after gst the

company has high sales where before gst the sale was
comparative low . so we see a good effect where one reason
could be gst .

4. ITC
ITC ANALYSIS
1. Sales- after looking and comparing the data of the sales of ITC in pre and post
GST.
we can see that the percentage change in sales after GST is implemented is
more than the percentage change before GST. This shows that impact of GST
on ITC has been good, their indirect taxes expenses goes down and sue to that
their sales is growing.

Although there are few fluctuations in between, but they are due to the covid19
pandemic that decrease their sales and grown on a very slow pace at that time.

percentage changes in sales

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00
2 1 1 0 0 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2
' 2 '2 ' 2 '2 ' 2 '1 ' 1 ' 1 ' 1 ' 1 ' 1 '1 ' 1 '1 ' 1 ' 1 ' 1 ' 1 ' 1 ' 1
a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep
M M M M M M M M M M
Net profit- If we look and compare the data of net profit of ITC We can see that they
have increasing profits from past years because of ;ow indirect taxes their profit have
been increasing
But if we look closely, the impact on profits of The company due to covid19 pandemic
has not been good and we can see the downfall during the period 2020.

percentage changes in Profit

160
140
120
100
80
60
40
20
0
2 1 1 0 0 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2
' 2 ' 2 ' 2 ' 2 ' 2 ' 1 ' 1 ' 1 ' 1 '1 ' 1 '1 ' 1 '1 ' 1 '1 ' 1 ' 1 ' 1 ' 1
a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep
M M M M M M M M M M

Purchase- if we look at the data of purchase of ITC we can see there are many ups and
downs in the amount. Also there is stability in the data. This states that company have
little unorganized system of purchase and should focus on it. If we see from the basis of
Pre and post Gst their is only a lineant change of it.

percentage changes in Purchase

120

100

80

60

40

20

0
2 1 1 0 0 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2
' 2 ' 2 ' 2 ' 2 ' 2 ' 1 ' 1 ' 1 ' 1 '1 ' 1 '1 ' 1 '1 ' 1 '1 ' 1 ' 1 ' 1 ' 1
a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep a r S ep
M M M M M M M M M M

5. DABUR
The profits of the company pre gst were around 200 crores per quarter but after
gst they have increased to around 400 crores per quarter, the profits have almost
doubled. Again the same kind of trend is to be noted for a company in the
FMCG.
In the BELOW chart we can see that in 2012 the number is around 40 to 50 and is declining in
2017 and is increasing again in 2020 and in 2022 the number is above 50 so compared to
Profit/RFO the above chart shows less fluctuations in 2018.

CONCLUSION
Overall, the sector has benefited from the GST, since the taxes, which were originally
between 22 and 24 percent, have decreased to about 15 percent. Companies can cut
expenses because taxes on logistics and raw materials have also been decreased, which
enables them to boost sales and profits. This has been observed for all companies.
Taxes and profits have historically been in conflict. Changing tax rates is a key
instrument for fostering corporate growth. Due to the reduction in taxes, the sector
growth is projected to have increased by 5–6%.

REFERENCES

 www.wikipedia.org
 www.moneycontrol.com

www.moneycontrol.com
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