Pre-Budget Expectations of FMCG Sector

PRE-BUDGET EXPECTATIONS OF FMCG SECTOR
Submitted To: Prof. Rasananda Panda
Prepared By: Milan Dave (A 14) Sweety Hirpara (A 19) Yatindra Jha (A 23) Manisha Ramrakhyani(A 35)
What are Fast Moving Consumer Goods (FMCG)?
Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). Examples are toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents. A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops.
Top 10 FMCG Companies. . . .

Proctor & Gamble: Nestl Anheuser-Busch Unilever Coca-Cola PepsiCo Kraft Foods Philip Morris International British American Tobacco Nokia
FMCG Growth Story
FMCG sector has been able to maintain the growth momentum till date. The continued off take of FMCG products was driven by strong rural demand as well as rising modern trade and preference of premium products. Implementation of GST and revision of tax slabs will provide a boost to rising demand and better pricing for the sector.
Measures Taken in Fiscal Stimulus Packages and Budget 2011-12
Emphasis on Agriculture and rural development leading to higher rural income expected to drive rural consumption. Income tax exemption slab for general tax payers raised from Rs 1.6 lacs p.a. to 1.8 lacs p.a. Positive for all FMCG companies. No hike in excise duty on cigarettes Positive for ITC No hike in standard rate of excise duty Positive for all FMCG companies
Budget Expectations of FMCG
FICCI seeks reduction in VAT
FICCI believes that biscuits should be treated as merit goods and therefore be secured in a more rational manner. It is expected that the budget 2012-13 exempts biscuits from VAT, or at least as lower as 12-15% the rate of VAT on them. Product of mass consumption and sold in larger quantities in the urban as well as rural areas of the country. Being a high shelf life and a highly price sensitive product, it is seen in the past that higher tax or a higher price has decreased their consumption. More than 3.5 million people have a direct or indirect association with the biscuit industry in India.
FICCI expects the budget 2012-2013 to put packaged drinking water, a common man's product, in the nil category. Adoption of macro view instead of levying excise duties on products.
it is expected that the excise duty be reduced in a calibrated manner in two phases: it should be brought down to 4% in the first phase and reduced to 0 in the second
Excise Duty
It is also expected that the budget looks into the soy processed food products sector. Currently, the excise duty being levied on these products, whose nutritional value is high, is 8-12% which is severely affecting the domestic consumption of these products. The World Health Organization (WHO) has recommended that the consumption of soy processed food products be accelerated, which will only happen when the excise duty on them is done away totally.
Continued. . . .
There is expectation of 12-15% rise in excise duties on cigarettes. (However, this will have no effect on ITC, the largest cigarette manufacturer, as the company has already increased cigarette prices across various brands significantly in anticipation of rise in duty)
Removal of Corporate Service Tax
Industry also expects the Corporate Service Tax to be removed. (It increases the cost of products, thereby threatening sale and margins, and an ushering in of the Goods and Services Tax)
Consistency in Fiscal Policy
The FMCG industry's key expectations from the Budget include a consistency in fiscal policy to enable companies to plan for medium term and thereby aid new investments; and measures to manage fiscal deficit by judicious spending," says Kimsuka Narsimhan, Chief Financial Officer, Pepsico India. ((it leverages its expertise in production efficiencies in order to keep input costs in control and offset the impact of inflation and increased taxation on the consumer)) Budgetary measures should also sustain concessions for Agro based industries to incentivize investments, she says.
Direct Taxes Code (DTC) Bill
While last year's Budget brought some cheer to the Rs 1,30,000 crore fast moving consumer goods industry(FMCG) in the form of an upward revision in the income tax exemption limit and a reduction in corporate tax surcharge, members of the sector this year too expect more disposable income in the hands of consumers with a restructuring of income tax slabs in line with the Direct Taxes Code (DTC) Bill. DTC is aimed at simplifying tax laws and lowering tax rates.
Continued. . . .
Increase in exemption limit Medical reimbursement Abolish surcharge & education cess Exemption on LTA(Leave Travel Allowance) Capital gain from property sale to be added in taxable income
Hike Duties on Edible oil imports
Import of refined palm oil from Malasiya and Indonesia. (About 50% of domestic demand)
Existing 7.5% duties on Import of refined edible oils

Proposed to hike up to 16.5% to save domestic industries from closing down
GST need of the hour
An irregular and restrictive tax regime has been giving major FMCG and retail businesses a rather hard time and that's the biggest issue they want the finance minister to address in this year's budget.
FMCG sector interested in boosting sales volume by decreasing price but Inflation is so high that it is driving price of the goods higher. Upon implication of GST, it will lead to remove other levies like Octroi, Central sales tax, value added tax making goods cheaper.
Continued . . . .
Bijou Kurien, CEO, Reliance Retail says, "Because of the delay in the implementation of the GST, several states have been arbitrarily changing the previously agreed upon standard rates for VAT and have been imposing entry taxes etc. The National Council of Applied Economic Research has said that implementing GST would boost India's one trillion-dollar-plus economy between 0.9% and 1.7%, over and above national growth.
Works Cited:
Websites:
http://www.moneycontrol.com/budget2012/budgetimpact//budget2012/budget-impact/fmcg.html, 8th March, 2012 http://articles.economictimes.indiatimes.com/2012-0216/news/31066805_1_biscuit-industry-food-productsexcise-duty, 6th March, 2012 http://economictimes.indiatimes.com/news/news-byindustry/cons-products/tobacco/budget-2012-maintain-taxstability-in-excise-rates-for-cigarette/tobacco-industry-saysficcci/articleshow/11926370.cms, 8th March, 2012

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Pre-Budget Expectations of FMCG Sector

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PRE-BUDGET EXPECTATIONS OF FMCG SECTOR

Submitted To: Prof. Rasananda Panda

What are Fast Moving Consumer Goods (FMCG)?

Top 10 FMCG Companies. . . .

FMCG Growth Story

Measures Taken in Fiscal Stimulus Packages and Budget 2011-12

Budget Expectations of FMCG

FICCI seeks reduction in VAT

Removal of Corporate Service Tax

Consistency in Fiscal Policy

Direct Taxes Code (DTC) Bill

Hike Duties on Edible oil imports

Existing 7.5% duties on Import of refined edible oils

GST need of the hour

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