India’s GST Council has cleared a two-slab GST rate reduction plan consisting of 5% and 18%, starting from September 22, 2025. The change will likely make FMCG companies such as Britannia, Colgate, Nestlé, Dabur, and Hindustan Unilever gain by the facilitation of demand and the lowering of consumer prices.
GST Rate Cut Brings New Tax Structure
The Goods and Services Tax (GST) Council of India located in New Delhi has introduced a simple two-slab system that will replace the previous complex structure of 28%, 18%, 12%, and 5%. The newly approved slabs remain at 5% and 18%, while a special rate of 40% will apply to sin and luxury goods.
This move, effective September 22, 2025, is one of the most significant changes in India’s indirect tax system since the GST implementation in 2017. The rate rationalisation is expected to simplify compliance, ease consumer costs, and increase formalisation across the sectors.
Impact of GST Rate Cut on FMCG Sector
The GST rate cut is very important for the fast-moving consumer goods (FMCG) industry, which is the consumption-driven economy of India. By putting essential and daily-use things under the 5% bracket, the council has opened the door for volume growth and affordability.
Large companies in food, beverages, personal care, and household essentials are likely to see an increase in demand as consumers will have reduced tax liabilities.
- Colgate-Palmolive (India)
Colgate-Palmolive (India) Ltd., located in Mumbai, is a leader in oral care products in the Indian market. This new tax structure means that the tariffs for Colgate’s entire product range will be reduced. Toothpaste, toothbrushes, and personal care products have moved from 18% to 5%, while tooth powder has gone down from 12% to 5%.
Such a wide-ranging benefit in its product range makes Colgate one of the top beneficiaries of the GST rate cut.
- Britannia Industries
Britannia Industries Ltd., headquartered in Bengaluru, is a leader in the packaged-foods industry of India. Since biscuits and cakes make up 78% of the company’s sales, and both are being moved from 18% to 5% GST, thus the company benefits to the extent of nearly 85% of the company’s product portfolio. Its dairy products, which account for another 5%, also become part of the 5% rate.
It is expected that this change will not only weaken Britannia’s competitors but will also encourage daily snacks to become more accessible to consumers.
- Nestlé India
Nestlé India Ltd., based in Gurugram, is the major FMCG multinational in India. Now, 67% of the sales of the company are going to be benefited by this change. Products like coffee, chocolates, noodles, and milkmaid which were hitherto at higher rates are now under the 5% bracket.
Just noodles and milkmaid which are 35% of Nestlé’s total sales will be enough for the company to have a demand development right after the execution.
- Dabur India
Dabur India Ltd., based in Ghaziabad, is one of the first and most diverse FMCG companies in India. The GST rate cut is going to affect nearly half of Dabur’s consolidated sales. Toothpaste, hair oils, and shampoos which were 18% and have now shifted to 5%. Moreover, juices, digestives, and toothpowder have dropped from 12% to 5%.
This broad coverage ensures price stability across Dabur’s natural and Ayurvedic product range.
- Hindustan Unilever (HUL)
Hindustan Unilever Ltd. (HUL), located in Mumbai, is the largest FMCG company in India. Some 37% of the company’s sales will gain from the change, with products such as soaps, shampoos, toothpastes, health food drinks, and coffee becoming more price attractive, as they now attract a 5% GST rate. At the same time, it appears that the sauces, jams, mayonnaise, and noodles, representing about 3% of the sales, have been reduced from 12% to 5%.
Since HUL has a large consumer base, such a decrease increases its capacity to run volume-driven growth in both urban and rural markets, where it has a presence.
- Bikaji Foods
Bikaji Foods International Ltd., located in Bikaner, gets 80–85% of its revenue from traditional Indian snacks such as namkeens, bhujia, and ready-to-eat items. The products have had the GST rate reduced from 12% to 5%, which in turn provides Bikaji immediate benefit in its price-sensitive segment.
- Bajaj Consumer Care
Bajaj Consumer Care Ltd., located in Udaipur, gets its 83% of sales from hair oils. If the GST rate on hair oils is dropped from 18% to 5%, then the company becomes more competitive in terms of product pricing, thus making it easier to get a good hold of both the mass and premium categories.
- Varun Beverages
Varun Beverages Ltd., the biggest bottler of PepsiCo products in India, will only pay 40% instead of 28% plus a 12% cess on carbonated beverages. Although the rate is higher, the fusion of cess with the base structure means that the effective taxation remains more or less unchanged.
- Footwear Stocks: Bata, Metro, Red Tape
The GST on footwear of value up to ₹2,500 has been reduced from 12% to 5%. As a result, Bata India Ltd., Metro Brands Ltd., and Red Tape, which serve both the mass and the premium consumers, receive this change very well. However, shoes that cost more than ₹2,500 will still have 18% GST imposed on them.
Also Read: FMCG Stocks Rally on GST Rate Cut Optimism
Broader Economic Significance of GST Rate Cut
The new GST system will:
- Increase consumption as a result of lower end-prices for essential goods.
- This led to the formalisation of the FMCG sector, as the cost difference between organised and unorganised players was reduced.
- Raise government revenues, as the tax base will be bigger due to higher compliance levels.
- Reduce inflationary pressures, as the tax on daily essentials will be decreased.
With this simplification of the tax system, India is moving closer to having an indirect tax regime that is more efficient, transparent, and consumer-friendly.
Future Outlook
Investor’s interest in listed FMCG companies may be revived as from September 22, 2025, when the GST rate cut will be operative. Along with reduced rates that are expected to enhance margins and sales, the market trend is forecast to be positive for FMCG stocks for the next few quarters by the analysts.
FAQ’s
How will GST 2.0 impact consumers directly?
For consumers, GST 2.0 means lower prices on essential goods and FMCG products, creating more savings in household budgets. By reducing tax rates on daily-use items, the reform is expected to improve affordability and boost overall consumption.
What does GST 2.0 mean for small businesses?
For small businesses, GST 2.0 offers a simplified two-rate structure that will make compliance easier, reduce administrative burdens, and improve transparency. Lower tax rates on essentials could also stimulate demand, indirectly supporting growth for SMEs in retail and distribution.
Which FMCG companies are expected to benefit from GST 2.0?
The GST rate cut is expected to boost consumer demand and lower product prices, directly benefiting leading FMCG companies such as Britannia, Colgate, Nestlé, Dabur, and Hindustan Unilever. These firms may see stronger sales volumes as everyday essentials become more affordable to consumers.
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