GST Council Meeting: The fast-moving consumer goods (FMCG) sector is poised for a revival following the introduction of a simplified goods and services tax (GST) structure that consolidates the earlier four slabs into two – 5 per cent and 18 per cent.

Under the revised framework, a broad range of household essentials, including soaps, shampoo, noodles, chocolates, namkeens and instant coffee, will now be taxed at just 5 per cent, reducing costs for both companies and consumers.

Union Finance Minister Nirmala Sitharaman announced the reform after the 56th GST Council meeting in New Delhi. The changes will take effect on September 22, coinciding with the start of Navratri. “This is going to have a positive impact on the economy,” Sitharaman remarked, underscoring the potential of the shift to boost consumption.

Lower Tax Rates on Daily Staples

The overhaul delivers significant savings on products that are part of everyday life. Toiletries such as hair oil, toothpaste, toothbrushes, shaving cream and toilet soaps – previously taxed at 18 per cent – are now under the 5 per cent bracket. Similarly, dairy products including butter, ghee and cheese have been moved from the 12 per cent slab to the lower rate.

Ethnic snacks such as bhujia, namkeens and mixtures, in addition to utensils, baby essentials like feeding bottles and clinical diapers, as well as sewing machines and their parts, are now eligible for the 5 per cent tax. Basic foods such as breads, paneer and ultra-high temperature processed milk will continue to be exempt from GST altogether.

FMCG Companies' Share Prices Climb Up To 4%

The announcement has already lifted market sentiment. On Thursday morning, the FMCG index gained 1.61 per cent, supported by strong share price movements across the sector.

The share market saw major players in the sector rally ahead as the industry celebrated the GST reforms. Shares of Britannia Industries climbed more than 4.5 per cent to touch Rs 6,180.35 apiece, while Dabur India stock surged 3.26 per cent to trade at Rs 561.1 around 10:10 AM. Nestle stock jumped 2.41 per cent, while shares of Hindustan Unilever and ITC gained 1.63 per cent and 1.71 per cent respectively in morning trading.

This signalled investor optimism over improved margins and volumes. Industry groups representing over 450,000 distributors and 13 million kirana retailers forecast that the reforms could accelerate growth in the sector by 2–3 percentage points. Analysts highlighted that the move comes at a crucial time, with high inflation and subdued demand dampening sales in recent quarters.

Consumer Relief Versus Fiscal Balancing

While the tax cuts make essentials more affordable, premium taxes on “sin goods” remain untouched. Tobacco products, gutkha and cigarettes will continue to attract 28 per cent GST along with a compensation cess until states have been repaid for earlier revenue losses, Sitharaman clarified.

Traders have been given sufficient time to manage inventories ahead of the September rollout, which is expected to minimise supply chain disruptions. By easing the financial burden on households and reviving consumer demand, the government aims to inject fresh momentum into one of the country’s most vital sectors while balancing the need for fiscal stability.