GST On Unbranded Food Packs: Big Brands To Grow, Local & Regional Players To Suffer

The smaller and regional firms will now have to pay 5% GST pre-packaged and labeled pulses and cereals such as rice, wheat, and flour (atta) are branded and packed in a unit container.

Pre-packaged and labeled, curd, lassi, and puffed rice would be subject to 5% GST. (Representative Image/ Getty)

The government decision to impose Goods and Services Tax (GST) of 5% on unbranded food packs will help the larger and organized players like Tata Consumer, ITC, and Adani Wilmar as the regional companies operating in pre-packaged and labeled food items were not paying taxes and will suffer due to squeezed margins. The smaller and regional firms will now have to pay 5% GST pre-packaged and labeled pulses and cereals such as rice, wheat, and flour (atta) are branded and packed in a unit container.

Similarly, pre-packaged and labeled, curd, lassi, and puffed rice would be subject to 5% GST.

Analysts believe that it will become a level playing field, especially in rural areas and urban poor in flour (atta), pulses, rice, and puffed rice.  The price difference between top brands and regional players will narrow down with much better quality from the leading brands.

India’s leading dairy producer Amul has already announced a hike in curd and allied products prices, while Nestle, Britannia, and Dabur are expected to follow suit by passing on the GST impact to consumers as a pass-through.

“The price differential between the branded and unbranded players operating in this segment will reduce, which is better for the organized large players. Margins of smaller and regional players will erode while large branded firms will enjoy economies of scale. So, consumers will go for branded items,” Paras Bothra, CIO, Ashika Investment Managers Pvt Ltd. told ABP News.

FMGC major ITC recently highlighted in its FY22 annual report that branded players in atta were suffering due to the taxation loophole, which has now gone away.

“The market of branded staples will open up in a big way. There are a large number of brands operating without GST and selling in small towns, rural markets, and even in metros,” said Abneesh Roy, an analyst at Edelweiss Securities.

Bothra believes that it is a new trend emerging since Covid, that the big players are getting bigger and smaller players are getting edged out of competition.